We’re all victims of ever increasing prices, (Trump’s dead wrong or lying as usual, when he says He’s kept prices down), which according to the dictionary of such, is called ‘inflation,’ and its cause is really quite simple, and it is, “an increase in the currency supply.” I have made it even simpler, when I formulated “Stott’s Law” several years ago, and it applies to just about everything, be it animal, vegetable or mineral. That law is, “The more of anything there is, the less they will be worth.” So, the more potatoes there are, the less they will be worth. If there were a bumper crop of wheat, corn, potatoes, or more of anything, the less they would be worth, in direct proportion of their supply. In a dry climate, in which I live, water is short, and we get maybe 10 inches of rain a year. It’ grand and the 300 days of sunshine are superb, but I pay $300 a month for water, to keep my large lawn and dozen hundred year old trees, green and prospering. In the east, where 40 inches of rain is normal in most places, lawns and trees thrive with no additional moisture. If there were millions of Model A Fords around, as there were in 1930, they would be cheap, because there were so many of them. In 1930, you could get one for a hundred bucks, and now, a restored one, is $30,000.
Now, about the title of this, which is “Thin Air,” and there are trillions of examples of such, and they don’t have any air in them. Take bit-coins, which have recently lost over a third of their price. Notice, I didn’t say ‘value,’ because bit-coins have a price, but no value, as they are created out of thin-air. There is nothing to back them, like your home, which is a physical thing which you live in and repair, paint, and maintain, to keep its value up. A large physical thing, as opposed to a share of stock or a bit-coin.
A share of stock, represents a teensy ownership of a corporation, and therefore a physical or valuable thing? Think about it. No one who owns stocks, has them in physical possession. A share of stock is an entry in a computer, showing that you have that share. Is it valuable? You decide, since there are 10,674,000,000 shares of Amazon stock on the books, but none in physical existence. Yet each share of non-extant, computer entry share, has a price There are 31,983,000,000 shares of Ford stock on the books, but none in physical existence, even though they have a price. The fact that Amazon and Ford do physically exist, may give you some assurance, as opposed to bit-coin, but since I have never owned a share of stock or a bit-coin, am no expert on either, other than to say as Stott’s law says, their value is based on computer entries of how many there are.
Your home is an inflation ‘hedge,’ meaning it is a physical ’protection’ against inflation. Your home, even if your home has a mortgage, is an inflation hedge, because the interest is deductible from your income taxes. Your car gives you transportation, a home give you residence; vitamins and minerals give you health, (although far too few take them), and police, guns, insulation, insurance policies and physical possession of these, gives you pleasure, health, convenience, and life itself possibly. These are purchased with U.S. dollars, here in the U.S., and in other lands’ monies overseas. We need dollars to buy things, be safe, comfortable, and literally, to live. About that, I have no problems.
It’s the ‘thin-air’ I worry about. As an example, the dollar is created out of thin-air by the Federal Reserve, who sells them to the U.S. Treasury to pay its bills and welfare, created by laws, politicians, and bureaucrats. The U.S. pays the Federal Reserve for the dollars it buys, and also pays interest for thin-air created dollars. The Treasury, never has enough thin-air created, interest charged, dollars, to balance its budget, so it constantly buys more thin-air created dollars from the Federal Reserve, meaning that there are so many dollars over budget created, that there is inflation, as in Stott’s Law. OK, Here’s your argument. The dollar is backed by, “The full faith and credit of the U.S. government,” which doesn’t impress me. Does it you?
Over a hundred million Americans have maybe an IRA, savings account, or a host of other ‘investments’ in thin-air created un-backed bucks, which are supposed to give us security for our old age, even though they constantly loose purchasing power. A CEO can destroy a stock. I made a list of corporations which no longer exist, thanks to CEO’s usually, and holders of those stocks, lost all.
Pan Am World Airways, Border Books, Blockbuster, Toys R Us, Compaq, Circuit City, Radio Shack, Tower Records, Enron, Eastern Airlines, (I went to school with the daughter of its president), Woolworths, Montgomery Ward, Western Auto, Sears Roebuck, Kodak, Bethlehem Steel, Polaroid, TWA, Studebaker, Packard, Saab, Arthur Anderson (Melissa worked for them), A&P grocers, Netscape, Lehman Brothers, Texaco, Gulf, Mobil, and Esso gasolines, and the list can go on. All stock holders of those, lost all of their investments.
Inflation is rampart around the world, without exception. All currencies are losing buying power, or value. Bit-coins and stocks are not it, and even if you make a few dollars on something, you pay taxes on your profits. Even our homes have taxes, and if you sell at a profit, capital gains taxes will hurt also. What is there which has no taxes? A few years ago, I wrote column about what a loaf of bread would cost, if there were no taxes on the farms, bakeries, salaries, real estate, tractors, trucks, employees, machinery, utilities, fuel, land, seeds, fertilizer, etc and that loaf of bread would cost but a few cents back then, and now, maybe still far less than a dollar.
After much thought, I can think of no other insurance against inflation, which has no taxes, monthly fees, are beautiful, compact, can be passed on to ones kids tax free, and as the dollar loses its value, gold and silver go up in dollar prices as the value of the dollar goes down. Don’t men t bore you, but it’s us at 1% over our cost, delivered to your hands.
Don Stott. don@coloradogold.com. 970-246-4949