We hear that constantly, and when I began doing precious metals in November of 1977, I heard it then also. True, it doesn’t pay any interest. Neither does silver, nor your home, car, lawn mower, watch, furniture, clothes, computer, furnace, tools, or food in your refrigerator or in cans on a shelf. Those things are tangibles which we need, eat, or use, so no interest can be expected. What is interest anyway? My dictionary has several, but to sum it up, as far as economics is concerned, it is briefly, the sum paid for a loan of money. You loan someone or a bank your money, interest is the fee charged or paid for the loan. The corner loan shark may charge 10% a month for a bad credit risk, but since your corner bank knows all about you, including where you live, etc., they currently will pay you less than 1% interest for you loaning them your money. They loan your money on which they pay you less than 1% interest, to a customer at several times that, and that’s how banks make profits. (We won’t, for now anyway, go into the fact that when you borrow from a bank, they create the money out of thin air).
Way back in 1977, gold was about $250 an ounce, and I was selling Krugerrands at about $300. That investment today, would be worth $2104 a Krugerrand, or ‘interest’ of over 700%. Except the Krugerrand has paid no interest. You didn’t ‘loan’ your money to anyone to earn interest. You made an investment in paper dollar bills, with the hope that what you invested in, would increase in value faster than the paper dollars would decrease in value, due to inflation. If you ‘invested’ in a home in 1977, 43 years later, if you had kept the home, maintained it well, and the value didn’t ‘go down,’ you may not have had it go up 700%, but you would surely be ahead, if you wished to sell, and a place you wished to move to, hadn’t increased in dollar price faster than your home of 43 years. During that 43 years, you would have had to pay to keep it in repair, maybe two roofs, lots of other problems homes have, which have to be paid for, plus yearly property taxes and insurance. Perhaps for the first 15 to 30 years, you may have had to pay a mortgage every month, of at least 3% interest, so you may not have shown a dollar profit at all, counting all the expenses and interest paid on a mortgage. But you have had a nice place to live, and we all need that.
Gold and silver have paid no interest, and have had no taxes or insurance costs, and you certainly cannot live in a gold or silver coin, but you need a place to live. Buying a home, most of the time, makes a fine investment, as does gold and silver. When do gold and silver not make a good investment? The obvious answer is that when there is no dollar devaluing or inflation. There was no inflation for the first 175 or more years on our nation’s existence, and saving in dollars was fine. A look at gold’s price will confirm that, since it was $20.67 per ounce for well over 150 years. It remained at that price, because the now ‘swamp’ in D.C., hadn’t discovered that a politician can buy votes by allowing his constituency to feed at the public trough, which is constantly refilled with more and more handouts. The public debt has gone from virtually zero, to over $26 trillion, which means that a nickel Coke was extinct about 1950.
Are the prices of gold and silver an indication of the health and buying power of the dollar? Of course. As gold and silver ‘go up’ in dollar prices, so do the prices of homes, pickups, and all the other things mentioned in a foregoing paragraph. Since politicians have been unable to stop inflation, and balance the budget, all tangible things will go up in dollar prices for as long as the dollar and swamp exist, and that is as logical and provable a fact as is two plus two equals four.
The object of an ‘investment,’ which licensed financial gurus place your money at their will, and hope to get you an increase in dollars, charging for their services of course, is to show you a profit, after their fees and taxes paid on the capital gains. Me? I’d rather have gold and silver in a safe place, sell some if I need a few dollars, and leave the rest to my kids when I die with no inheritance taxes. We charge 1% when you buy, including shipping to you, and $25 when you sell to cover our expenses, and you ship. Gold and silver investing is as logical as saving in devaluing dollars is illogical. Fortunately, a small percentage of the public are illogical, and dollar prices of gold and silver have not gone nuts as they would or maybe will, as more and more become disgusted with politicians and un-backed paper dollars. Time may heal all wounds, but not saving in gold and silver -will not heal that inflation wound in time.
-Dont Stott
don@coloradogold.com.