There are many laws and sayings, which concern economics as well as other items, and one of them I hear constantly is:
“Do you think metals will go up?” My answer is, “Of course, because the Fed’s constantly printing dollars to pay bills Congress passed, the president signed, and the more they print, which are backed by zero, all things priced in dollars, will go up in dollars, but not in value, so government is stealing from you (inflation), to pay their bills, and there is nothing you can do to stop it, other than protecting yourself with insurance in the form of precious metals.”
“OK then, when will they go up?” My answer is: “I don’t know what will happen ten minutes from now. Anyone who thinks they can predict what will happen even 30 seconds from now is lying. If I knew two earthquakes in Venezuela would happen a half hour apart, destroying thousands of buildings and killing thousands, would I have left before they happened? Or if I knew silver would go from $1.20 down to 65 cents, would I have sold all of mine and bought it back at the low price, now?”
There is no such law as “If I had only known.” That’s only a universal saying when something happens, of which you wish you had foreknowledge!
We all wish there was a method of “Buying low (now) and selling high,” other than luck or inside trading, which always seems to be well hidden.
Gresham’s law states that, “Bad money drives out good money.” This is can be observed by people trying to get rid of bad money and keep good money, because bad money is undesirable. People spend their dollars as fast as they can, because they constantly lose value. A fixed rate mortgage of what mortgages were a few years ago, such as maybe 3%, is ‘found money,’ because you are paying it off at the same amount of dollars (bad money) each month, when a mortgage today would be 6.5%. It’s the same with anything bought on credit.
A friend of mine’s daughter had a big credit card debt at 21% interest, and she just kept paying it each month and never thought about doing the sensible thing, which is paying it off as quickly as possible, and stop adding to it. She followed my advice and can’t thank me enough. She’s doing it and is amazed that she never thought of it.
Credit is bad money, and its cost is unbelievable. Get out of it and stop using it. Another friend went through a divorce and had to pay half of their net worth to his ex-wife. He asked me what to do, and I told him to borrow it, using his home as collateral, and pay it off as fast as possible. He did it and paid it off ($175,000) within three or four years, and he’s just fine, and his credit rating is probably 800 from his actions.
Since Gresham’s law says that ‘bad money’ (dollars) drives out ‘good money’ (gold and silver), the smart thing to do, is get rid of the bad money (dollars), and put surplus bad money, in good money (gold and silver), and hold them, as Gresham observed. As the years pass, silver will go back to $1.20 an ounce in bad money, and continue to escalate, as the buck’s printing presses will continue to spew out bad money.
Stott’s law says that, “The more of anything there is, the less they will be worth, and the less of anything there is, the more they will be worth.” That applies to dollars as well as water in the desert, and practically anything you can think of, including gold and silver. There’s far more gold than silver, so silver is worth usually about 80% less than gold per ounce, but it is a precious metal and inflation insurance also. I have both and everyone should have both, because eventually, no, I don’t know when, you will need silver to barter with, when no one wants your bad money dollars.
People wanting to get rid of bad money, has happened over and over throughout history, and at the end, the bad money is used as insulation or wallpaper.
I’m so old, that I actually remember selling gold at $250 and silver at $1.25. I actually do remember nickel Cokes, Hershey bars and quarter a gallon gasoline. I was only six, but I remember my Dad buying a new Plymouth, in 1940, and I later found out he paid $650 for it. After WW II, I do remember him buying a 1949 Ford for about $1900, and it had overdrive, and a V-8 engine. I loved to drive that car, which today, would bring about $25,000 in bad money. There are so few left, as Stott’s law explains.
When things happen slowly, no matter how good or bad, as time passes, you get used to them, and eventually don’t even give it a second thought. I’ve had my home for 35 years, and it’s worth nine times what I paid for it in bad money. It’s the same home! Bad money proves both Gresham’s and Stott’s laws.
This brings up another subject in economics, which few think about. Rent or buy? I consider this an easy one. If you rent something, as inflation continues, your rent will go up in bad money, because your landlord’s costs and necessary profits go up in bad money. If you buy, your base stays in place, and no one can increase your rent. When I had ten ice cream parlors in Philly, I always bought the buildings, and never even considered renting. The buildings stayed the same, and their value went up in bad money, but since I owned tem, I was safe. Homes or businesses: If you can buy, do so and avoid renting anything!
Hope your Fourth of July was great! Trump gave two great speeches! If you were east of Texas, I’m sure you were unbelievably hot, and here with the western fires going, we had some smoke but our 11% humidity, even at 90 degrees, was pleasant. Advice? Get out of big democrat controlled ‘sanctuary’ cities.
-Don Stott don@cooloradogold.com