A Wall Street Journal last week, reported that the Treasury indicates ‘everything is doing as it should, with inflation at 2.3%, which is where we want it.’ If you have a slow leak in a tire, obviously something is wrong. If you have a small leak in your roof, it needs fixing. If your faucet leaks, it may need a new “o” ring or washer to stop it. Comparisons can go on and on, using everything we use, live in or drive as adequate comparisons. A small leak in your car, a small tear in your jeans, a few weeds in your garden, or a weak margarita at your favorite Mexican restaurant maybe. A small bit of everything. A small leak in your money? Why does the Treasury want a 2.3% leak in our money?
That’s what inflation is: A small leak in your money, only you can’t fix it as you can all the other things mentioned above. Every year, your dollar loses 2.3% of its purchasing power. If inflation figures are correct, in five years, a ten dollar bill will be worth $9.13. If you buy a ten year “T” bill paying 3.1% interest, with 2.3% inflation, you are making .8% profit. One eighth of one percent, if you subtract 2.3% inflation from 3.1% interest. Where’s the profit in saving your money for one eighth of one percent interest?
Many times you can buy a new car for five years at no interest at all. When people fall into that, they usually don’t realize that as soon as you drive it away from the dealership, it becomes a used car, and worth about 25% less than you just signed up for, at no interest. If that isn’t bad enough, if you finance a new car at maybe 5% interest, and millions do, it may take many years for you to ‘break even’ with your new car; meaning worth more than is owed for it. A new car leased for convenience or tax purposes, will always be an extremely poor investment. Actually, new cars are a poor investment in any form of payment. Better to find a used one with low mileage, pay cash for it and care for it, because every year of its existence will lower its value. An older used car with low mileage is the best buy. Its age has lowered its price, and low mileage will mean it will last a long time. So much for cars…in my opinion anyway. We need a car or truck to travel or make a living, so why not use your head and make the best, lowest cost method to own and drive a car or truck?
Returning back to the 2.3% inflation, neither you nor I can fix it as we can fix a leaky roof, car, torn jeans or a flat tire. We can’t fix inflation, simply because government causes it, and knows that you think 3.1% interest is good. They also know that it is in reality, a mere eighth of one percent actual interest, and it is taxable. They know it, and hope you don’t, because if the probably 200 million American investors realized that they were being flim flamed by publicized 3.1% interest on government bonds, that were in reality far less than 1%, they’d buy gold or silver, which has had over a 6,000% increase in price since 1933. There is a price ratio between gold and silver. Currently gold is about 83 times the price of silver, and historically, gold has always been 16 times the price of silver. This makes silver a good buy if you have a place to store it. The ratio between gold and dollars, is that price of gold reflects the value of the dollar. $20.67 in 1933, and $1225 now, or about a 6,000% increase. Figure it another way. A good men’s suit has always been priced at about an ounce of gold. It still is. A gallon of gas has always been priced at about two silver dimes, and it still is. So if you save in silver and gold, you will be able to always buy what an ounce of gold or silver buys, no matter what its price was when you bought it…with market trends being what they are. Supply and demand control the prices of just about everything, and this includes gold and silver. If, over the years, your savings were in gold and silver, you’d be ahead of inflation, which is beyond our control. Paper money value, always has a downward spiral, and throughout history, paper money has always ended at being worth zero. No exceptions anywhere or at any time. Always, eventually, zero. Gold and silver never go below their cost of production, which is certainly not zero. Inflation makes the cost of mining, milling, smelting, manufacturing, and distributing gold and silver more and more expensive as the value of the paper money goes down. You cannot lose value or the purchasing power of gold and silver, since their prices are determined by supply and demand as well as the cost of production.
There is one other item in the prices of gold and silver related to cost of production and supply and demand. As currencies begin to lose value in an ever more obvious way, by increase in cost of goods, more and more people will abandon currencies and switch to gold and silver, thereby making the demand ever higher and resulting prices will probably exceed inflation. Don Stott – 1-888-786-8822