…… A Question About The Value Of A Dollar.

[Hansa44]

I've been reading article after article that the U.S. currency has little value or zero value because it is not backed by gold or silver.

My question is does ANY country in the world back their so called money with gold and silver? I don't think so.

So what is going on? Almost looks like the world is trying to bring us to our knees which is weird because all they have is fiat money themselves.

 

[Desertrat]

Even without a tie to backing a currency with some intrinsic-value material, fiat or paper money of an exporting nation can hold its value. The balance-of-payments thing. And, if the government does not do deficit spending in its budget, the system can stay stable. In that set of circumstances, there is no need to run the printing presses overtime nor to make credit rates unduly low.

Once we became a nation of importers instead of exporters and once we got into enormous public debt, this all changed. Obviously.

But even if we were on a gold standard, we're still a nation of importers and would be in a recession--if not a Panic, as was common in the old days of actually being on the gold standard.

(Note that this is a quick and dirty overview, very simplified.)

'Rat

 

[tanstaafl]

Some people seem to think the Euro and/or the Swiss Franc have gold backing, but they do not any more than the US Dollar does. What many countries have are gold reserves and some countries even have a ratio of their central bank gold reserves to the amount of their currency in circulation, but that's not the same thing. As far as I know there is nowhere in the entire world where you take the local currency to their central bank and convert it to gold or silver at a fixed rate (which is the definition of a gold- or silver-backed currency).

Here's a little goldbug humor I modified from a joke about how university studies are expensive with elaborate explanations, but with a punchline about a local college, a Playboy, a restroom stall, and the tip of a man's ... well, some of you know the joke and I'm not about to post it here.


Three groups were commissioned by the U.S. federal government to discover what the U.S. dollar should be worth.

The Federal Reserve allocated a budget of $5 million for research. After two years they produced a twenty-four volume report concluding that the dollar is worth whatever the Fed says it is and that everything good about the U.S. Dollar is due to their dollar policies, but everything bad about the U.S. is caused by people who lack confidence in the Fed's omnipotence.

The Congressional Budget Office spent $10 million on a research program that lasted three years and involved thousands of bureaucrats. They concluded that it would take four brand new federal government agencies to monitor and regulate every detail of American life before being able to determine what the dollar should be worth.

The International Monetary Fund spent $100 million and spread its research between two dozen third world countries. After heated debate and several occasions where delegates stormed out of meetings in protest, it was decided that the U.S. should contribute more dollars to the third world nations and apologize to everyone for being the wealthiest nation on Earth. Oh, and what was the question again?

A group of goldbugs butted in without being invited, exchanged their fiat $20.00 for a Silver Eagle, passed it around amongst themselves, and then unanimously declared the U.S. dollar wasn't worth a [expletive deleted]!

 

[Rucus Sunday]

As far as I know there is nowhere in the entire world where you take the local currency to their central bank and convert it to gold or silver at a fixed rate (which is the definition of a gold- or silver-backed currency).

By "fixed," do you mean static? How would a country do that these days? Unless they allowed the value of their gold/silver-backed currency to rise or fall with world metals markets, wouldn't they be cleaned out in fairly short order by speculators?

 

[45nut]

Here's a little goldbug humor I modified from a joke about how university studies are expensive with elaborate explanations, but with a punchline about a local college, a Playboy, a restroom stall, and the tip of a man's ... well, some of you know the joke and I'm not about to post it here.

Send that in a pm please.

 

[Dozdoats]

Hansa44,

You are correct. EVERY currency on the planet today is fiat, that is, NONE OF THEM are actually backed by gold or silver. There is no currency in the world that can be officially exchanged for ANY quantity of precious metals.

Of course, in the free market, you can still purchase precious metals with whatever currency you have in hand- but NOT AT FACE VALUE. That is, $1US in paper will not get you a silver dollar. It would when I was a kid, before 1964, but not any more.

Welcome to the brave new world of relative value money. All money establishes its value relative to the value of other money, not commodities. Far as I know this is the first time in human history that governments and banksters have been so bold as to try such a large scale swindle. It's also been the first time people have been generally misinformed and gullible enough to let them get away with it.

But it won't last...

dd

 

[Sebastian]

A dollar is worth 100 zinc copper washed pennies.

Right now.

But it looks very much like we will no longer be able to maintain the zinc standard as congress discovering its monetary authority has mandated that pennies and nickels may in the future be made of steel.

Of course the imperial department of the treasury responded with "how dare the congress tell the executive branch what we will make coins of - what do they think this is a constitutional republic or something?"

So expect a plastic standard or some such.

 

[Dozdoats]

Rucus,

The US Treasury still insists on the fiction that official US gold holdings are worth $42.2222 per troy ounce.

Let's see you buy some for that...

dd
=====================
http://www.fms.treas.gov/gold/index.html

Status Report of U.S. Treasury-Owned Gold

Overview

The Status Report of U.S. Treasury-Owned Gold (Gold Report):

Reflects gold bullion and gold coins owned by the federal government
Summarizes the fine troy ounces and the book value of gold held by various facilities
Identifies the value of gold coins and bullion on display at Federal Reserve banks; coins and bullion in reserve at the Federal Reserve Bank of New York; and gold held by U.S. Mint facilities

The book value of gold is currently $42.2222 per troy ounce. The information used to compile this reporting is received from the U.S. Mint, Federal Reserve banks, and FMS.

Current Report: May 30, 2008

Contacts

If you have questions about this report, please call (202) 874-9866.

 

[Hansa44]

I get irked when you see the value of our dollar dropping againt the euro. What makes the euro seem more valuable? Something tells me something is way fishy in this game. If our country is allowed to crunch, every country will crunch.

We're the biggest spenders in the history of the world and are what makes the world economy go 'round and 'round.

These are mighty interesting times and I tend to think this will attempt to turn into a really dirty game.

 

[EdPPCLI]

A dollars buys whatever someone is willing to sell you for a dollar. The problem for YOU is when you are not happy with what your dollar can get; the problem for the WORLD is when no one will accept that same dollar for anything.
Cheers

 

[tanstaafl]

Rucus Sunday - By "fixed," do you mean static? How would a country do that these days? Unless they allowed the value of their gold/silver-backed currency to rise or fall with world metals markets, wouldn't they be cleaned out in fairly short order by speculators?

That's the point and that's why Nixon closed the gold window in 1971. Without widespread global participation, no single country can have an effective silver- and/or gold-backed currency that is fixed. Gold would pour out of the country (as it did in the US before Nixon stopped it) when world gold prices are higher than the fixed rate of exchange. I have no answers to how it could be done today. It's worth noting that even the Norfed folks couldn't resolve the issue (and they were in the business of trying it) -- they started their $10 round with one full ounce of silver, then went to one-half ounce of silver (2005), and finally they went to one-fifth ounce of silver (2008) before the FBI shut them down.

45nut - I finished recreating the joke and now I'll try to PM you with it. It's funny and entirely innapropriate for a public forum, but great at parties in mixed company after the alcohol has been flowing awhile.

 

[Kris Gandillon]

The "book value" is often defined as the "acquisition cost" and not usually as the current market value.

Does the US Government actually BUY additional gold on a frequent basis or are they still only holding the gold that they purchased / confiscated many years ago, and thus the acquisition cost (book value) truly is $42/ounce?



Kris

 

[G-Man]

The military use to be the backing for our dollar, but with the loss of the Viet Nam war that was no longer the case.

Now the ONLY thing backing the US dollar is people believing
the spin doctor lies put out by the Gov, the Federal Reserve, Wallstreet, and MSM .......

 

[dragonslayer2001]

Russia

several M.E. countries and Indonesia have been talking for a couple of years of having gold backed currencys.

 

[Hiding Bear]

The reason that no currency has a direct gold or silver exchange value is that the IMF does not allow it.

Most likely the US, as largest voting member of the IMF, did not want competetion in the form of a gold-backed currency so it pushed through this rule (although I don't remember when).

A gold-backed currency out of the ME woudl be a rising star and would attract a lot of money to it. Therefore you can be sure the US will be against it.

Right now the US benefits greatly from all currencies being directly or indirectly pegged to the dollar. Indirectly because most countries will interviene to stop the dollar from falling too far against their currency.

 

[Hansa44]

The military use to be the backing for our dollar, but with the loss of the Viet Nam war that was no longer the case.

Now the ONLY thing backing the US dollar is people believing
the spin doctor lies put out by the Gov, the Federal Reserve, Wallstreet, and MSM .......

And that's my point exactly!! No one's money is backed by gold. So why is our dollar falling against the euro? Their money is as worthless as ours in the long run.

 

[nharrold]

I spent a few years in the ME, at ground level, and couldn't help noticing that the people had little or no faith in their paper money. As a result, whenever possible, they would buy gold jewelry or gold coins, in which they did have confidence. They had experienced gummints manipulation of money and wanted no part of it. That was an interesting eye-opener for me.

 

[Dozdoats]

The official price of US Government gold is whatever the USGov says it is. In 1933, when FDR issued his Executive Order confiscating all privately held gold bullion in the USA in excess of $100/person, the official price of gold was $20.67/ounce. As soon as the 'taking' was done at the official $20.67 price, gold was then officially revalued up to $35/ounce, which meant the dollar was also DEvalued 40% at the same time. ( http://www.reformation.org/roosevelt_confiscates_gold.html )

The 'new' official price of $42.2222 was set by Nixon in 1971, when he closed off access of the worlds' central banks to America's gold supply and divorced the dollar completely from gold. ( http://www.slanker.com/report/id39.htm ) So the price of gold, officially, can be whatever the government wants it to be, whenever it wants to change it.

The free market, however, has always valued gold much more closely in line with historical values. That is how a firm tie to a fixed commodity value provides stability for the value of a nation's currency- it eliminates the ability of the government to create too much excess paper money out of nothing. Creating too much paper money means people will swap their paper for the underlying commodity- IF the currency is redeemable.

Not allowing currencies to be redeemable, of course, fixes THAT problem- for governments, that is, but certainly not for those poor citizens and foreigners who are stuck with the irredemable junk paper. At that point the only recourse people have is to flee to the free market and swap their irredemable fake money for real money. As long as merchants will accept fake money for real money, that is.

IMHO you'll see the time when you can't buy silver or gold with any amount of dollars. No one will take them- not for PMs, or for anything else either. Call me foolish, paranoid, tinfoilhatted, goldbug or whatever you want. This has happened before in history, over and over and over, so many times it is depressingly dreary to repeat. And none of it is rocket science, it's all a matter of easily accessible history.

All I can say is, it flat confuses me how so many people can be too scared to buy some silver or gold to protect their savings while it's still possible, yet aren't even more scared of being flat broke in the long run- or even the short run.

dd

 

[Desertrat]

Hansa44, Euros are stronger because of two things: The Eurozone is more exporting than importing so they have less of a balance-of-payments problem; and, their interest rates are a bit above ours as they're actually trying to fight inflation.

You can add to those two primary factors that we're printing more dollars. Gresham's Law applies to paper money as well as intrinsic-value money.

'Rat

 

[Dozdoats]

And that's my point exactly!! No one's money is backed by gold. So why is our dollar falling against the euro? Their money is as worthless as ours in the long run.
=========================

It's simple.

It's a matter of CONFIDENCE. Ever hear of a 'con man?' A 'con game?' That's exactly what irredemable currency aka fiat money is- A CON GAME.
-----------------------------------
http://www.answers.com/topic/confidence-trick?cat=biz-fin

Dictionary:
confidence game

n.
A swindle in which the victim is defrauded after his or her confidence has been won.

Business Dictionary: Confidence Game
Scheme by which a swindler (Con Artist, Con Man) wins the confidence of his victim and then cheats him of his money by taking advantage of the confidence reposed in him.


Idioms: confidence game
Also, confidence trick; con game. A swindle in which the victim is defrauded after his or her trust has been won. For example, The police warned of a confidence game in which people were asked to turn over valuables for a so-called appraisal, or The typical confidence trick is easy to spot if you know what to look for, or I almost let myself be taken in by her con game--she seemed so sincere. These terms, which use confidence in the sense of "trust," date from the mid-1800s. They also gave rise to confidence man (or con man) for the swindler.


Law Dictionary: Confidence Game
"[a]ny scheme whereby a swindler wins the confidence of his victim and then cheats him out of his money by taking advantage of the confidence reposed in him." 95 N.E. 2d 80, 83. The elements of the crime of the confidence game are (1) an intentional false representation to the victim as to some past or present fact . . . (2) knowing it to be false . . . (3) with the intent that the victim rely on the representation . . . (4) the representation being made to obtain the victim's confidence. . . And thereafter his money and property. 304 A. 2d 260, 275.


Wikipedia: confidence trick
"Confidence Man" redirects here. For other uses, see Confidence Man (disambiguation).
"Grifter" redirects here. For the comic book character, see Grifter (comics).
"Scam" redirects here. For other uses, see Scam (disambiguation).


A confidence trick or confidence game, also known as a con, scam, swindle, grift, bunko or flim flam, is an attempt to swindle a person or persons (known as the "mark") which involves gaining his or her confidence. (For confidence tricks dealing with information theft or computers see social engineering.)
/snip/
=================

Uncle Scam has overplayed his hand in the global currency con game. The world is catching on now, though. The world, that is, except for most Americans, who remain blissfully ignorant of the fraud being perpetrated upon them by their own government. Not only blissfully ignorant, but even ACTIVELY RESISTANT to being informed about it.

The world has more confidence now in Euros than in US dollars. That's why it's valued higher. OF COURSE it has no more inherent worth than the dollar does. It's just that more people have more confidence in it.

Confidence. The key element in a successful con game.

Be sure YOUR confidence is in the right places- God, gold, guns and grub.

dd

 

[bev]

All I can say is, it flat confuses me how so many people can be too scared to buy some silver or gold to protect their savings while it's still possible, yet aren't even more scared of being flat broke in the long run- or even the short run.

dd

Thanks to everyone for trying to explain this whole mess - I'm really trying to "get it."

Dozdoats, I'm still not quite understanding what you stated above - how buying gold or silver would "protect my savings" - when I have to give up $900 for one ounce of gold, or $20 for a silver half dollar (I think). If I have $10,000 in savings, in order to "protect" it I buy 10 ounces of gold???

If I were to buy some silver coins, would I then be essentially paying $20 (with my silver half dollar) for a 50-cent can of corn?

Sorry, but I don't think I paid much attention in h.s. economics class!

 

[tanstaafl]

bev - I think Dozdoats was referring to the oft-quoted line about a one ounce gold coin buying a good quality suit of clothes in ancient Rome, in 1900, and today. So even though governments changed and inflation gutted the value of paper currency, gold retained its value and thus your savings. While that may well be true, no one makes the same claim for not so long ago when gold was $250 and silver was $4. If you read enough about gold, you'll see it regularly where someone says gold and silver are ways to maintain wealth and are NOT investments.

 

[Dozdoats]

bev,

Bless your heart, it IS hard for someone who's never really tried to deal with all this to understand it all at one swoop. It took me ten years of work to get it across to my mom, and she was born in 1927- when gold coins were still pocket money in the USA. A lifetime of propaganda and long habit makes it really really hard to get past the lies.

You were born after 1964, right? Or so close to 1964 that you were still very little in 1964? You don't have to answer that if you don't want to 8^).

See, I'm an old phart. I was born in the early 1950s. I grew up behind the counter of my dad's little country store, and part of my education was being taught all the flim-flams that city slickers would try to pull on us poor country bumpkins to cheat us out of money. Ever see the movie Paper Moon with Ryan and Tatum O'Neill? That sort of thing.

I grew up aware of the things that had to do with money, and greed, and cheating. We used to have an old Coke machine out front, one of the little short ones with rounded corners and a lever that you pulled after you put your money in, to get a 6.5 ounce Coke in the classic glass bottle. People would file down pennies till they were the size of a dime, and use them to fool the machine into giving them a Coke and a nickle in change. I still have a little paper bag of those little filed-down pennies in my dad's little safe, and I remember how mad it made him for someone to cheat us out of 9 cents like that.

I was working behind that counter in 1964, just barely into double digits in age, when LBJ said in a speech that 'silver was too valuable to be used as money' and they were changing the coinage. In 1965 the clad copper dimes, quarters started showing up, the Kennedy half dollars stayed 40% silver until 1969 though.

Before 1964 I could take a silver certificate to the local bank (if I could get one, a whole dollar was a LOT of money for me then) and swap it for a big ol' silver dollar. Boy, I thought I was really something then! I loved silver dollars, I was able to accumulate twenty odd of them as a kid and I still have every one of them.

After 1964 there was no more silver minted. Oh, it stayed in circulation for a while. But Gresham's law went to work and real silver coins got scarcer and scarcer. Gresham's law says in essence, "Bad money drives out good." In other words, when clad copper coins and real silver coins are in circulation at the same time, people will spend the clad and save the silver.

And they did.

Of course the banks and the mints were pulling silver out of circulation at the same time, so it didn't take too long for the silver coins to get scarce. After a few years it was rare to see one in circulation.

For the first little while my dad alternated between being mad at me and thinking it was funny that I used to sort out the real silver quarters and dimes. He had to have change to keep the register running, of course, and had no time for a kid's foolishness. Most of the time he would dump the real silver back in the trays at the start of the next day and use it for change. And the next night I'd sort it all out again.

But you know, after a while, when it got to be unusual to see a silver dime or quarter in circulation, he started sorting them out too. And he saved them, then.

Right now each of those silver dimes is worth $1.32. The silver quarters are worth $3.30. The half dollars, the 1964 and before ones, are worth $6.60. And the silver dollars that I swapped a paper dollar to get are worth $14.12. (see http://www.coinflation.com/ for current silver coin melt values)

How is that? They're still dimes, quarters, half dollars and dollars, right? And we still have dimes and quarters etc. right now that look just like they did then.

Well, sorta. But not exactly.

Remember that Coke machine I was talking about earlier, where you could get a Coke for a nickle? Well, the gas I pumped for customers back then was $.29.9 cents a gallon. Are you catching on yet? You see, more than just the money changed.

The prices of things did too.

It's called INFLATION.

Inflation is still happening. Prices are not really going UP- the purchasing power of your money is still going DOWN. And it is going to continue to do so.

What was a dime's worth of silver in 1964 now costs $1.32.

What was a dime's worth of gas in 1964 (1/3 of a gallon, that is) now costs... about how much? 8^)
3 X $1.32 = $3.96. How much is a gallon of gas where you live right now? I'd bet it's about $4.00, right?

So.... you can still buy a gallon of gas for thirty cents- as long as it's in silver.

Does that help?

dd

ps- please read my SIG, just below here...

 

[Dozdoats]

bev,

That was pretty long winded. But history is important, I think, in understanding this stuff.

Inflation.

Purchasing power.

This is Econ 101 IN THE REAL WORLD, not the classroom. We are not being academic here. This is your life at stake, and your families' lives- really. Seriously.

You know that old line the robber used on comedian Jack Benny, "Your money or your life?" And what was funny was the pause, until Benny, a notorious skinflint (in his comic persona anyway) said "I'm thinking...".

Your money or your life. It isn't just a straight line in a geriatric comedy routine. Your money IS your life. You trade big chunks of your time to get money, if you work for a living. Your time is money. Your life is time. So YOUR MONEY IS YOUR LIFE. It's the trade we make to earn a living in the modern world.

Inflation.

Purchasing power.

Those words again.

They're having hyperinflation- that's really really bad inflation- in Zimbabwe right now. Here's a snippet from yesterday's (July 3) Daily Reckoning:

But think you’ve got it bad? Think again. Inflation in the Ukraine is running at 30% per year. In Latvia, it’s 18%. Egypt is suffering 16% inflation. And, oh yes...there’s Zimbabwe. The average worker’s salary in Zimbabwe is 15 billion Zimbabwe dollars per month. The poor fellows are billionaires, every one of them. But it takes 19 billion Zimbabwe dollars just to buy a pack of 10 cookies – if you find it. A pound of margarine is 25 billion. - http://www.dailyreckoning.co.uk/economic-forecasts/night-in-maryland-00164.html

And you're worried about paying only $20 for a can of corn? 8^)

Seriously, we may well get to the point in this country where a can of corn DOES cost $20. But if that does happen, how much will your silver half dollar (BTW, it really is only $6.60 right now) be worth then?

That's the twisted logic of inflation, you see. That's what confuses people so much about the concept of purchasing power.

You are accustomed to having an idea what a dollar will buy. You know prices, you know your income, your budget, your bank balances. They are all in dollars. You think of dollars as familiar units of measure of money.

Problem is, your dollars are not FIXED- not stable in value, that is. They change, constantly. But only in one direction.

Down.

What do I mean, down? Take a look at the chart at http://futures.tradingcharts.com/chart/US/M . See the trend after 2002?

Down.

And it is going to continue that way. Prices are not going UP. The purchasing power of your dollars is going DOWN.

How do you protect your savings?

You hold something that HOLDS ITS VALUE as the purchasing power of the dollar declines. Like silver. Go to http://www.kitco.com/charts/historicalsilver.html , and look down the page to the list of multiyear silver charts in the bottom right hand column. Click the block in front of the one marked 2000- 2008 and then click on View Charts. That should bring up a historical silver chart covering 2000- 2008.

Your can of corn, let's say, costs a dollar right now- let's call it a nowdollar to make it easier to keep up with. Your nowdollar will also buy you a little less than 1/6 of that silver half dollar.

So time goes by. Your can of corn costs 20 futuredollars. How much is your silver half dollar worth, that cost you 6.6 nowdollars way back when? Assuming all other things being equal (which is of course a gigantic assumption), then your silver half dollar would be worth 132 futuredollars (6.6 X 20). Chances are, your silver half dollar would be worth a good many more futuredollars, assuming canned corn was a less than stable measure of value.

That's what protecting your purchasing power means. It means holding something as an asset that really is an asset, not something that diminishes over time.

Dollars are diminishing in purchasing power over time. It's going to get worse not better in the long run.

Inflation.

Purchasing power.

Understanding those two things is THE key to grasping what is going on out there in this economy. Knowing how to use those concepts in the real world is key to protecting your financial future and your family's financial future.

Unless Washington comes to its senses, starts acting responsibly, gets its spending under control and quits printing money like mad.

What do you think the odds on that are?

dd

 

[bev]

Dozdoats - thank you SO much for your last post! You put a lot of effort into trying to help me "get it."

I am starting to understand a little better (hope others are as well), but I'm still having trouble getting my head around trading 17 of my dollars for one silver dollar, or $900 of my dollars for one fifty-dollar gold coin.

DH and I don't have a whole lot saved yet other than our "3-6 months emergency fund," so thinking of buying gold/silver still feels like I'd be getting a whole lot less. Kind of like when I was little, my big brother offered me 5 whole pennies for only one of my dimes! Of course, I thought it was a great deal at the time.

Another concern - if/when TSHTF, and dollars aren't worth anything, how will gold or silver coins be used? Will we have groceries priced in gold and silver? Will we be forking over 50 bucks (gold) for something that would have cost $900 in dollars? Like an even trade? I'm not saying this right...

If we had $10,000 in the bank now, and converted it all to gold coins, assuming $900/ounce, we'd have roughly 11 gold coins (1-ounce, fifty dollar coins I think). That sure doesn't sound very good to me. Whereas we once had $10,000, we now have $550?

I guess I'll have to read all this again, and do some more research to feel comfortable with investing in gold/silver. And I DO need to understand it better before I'll ever have a HOPE of convincing DH to part with our dollars!

Again, I truly appreciate your taking the time to explain this to me. Maybe I should try to find an economics class.

Be patient with me y'all, I'll get it eventually!

 

[bev]

I was looking at the prices for American Eagle gold coins and silver dollars at http://www. cmi-gold-silver.com - I'm so new to all this I wouldn't have the first idea where to even buy these coins, but I got those $-figures from that site.

I hope this hasn't been a thread hijack.

 

[Hansa44]

Dozdoats - thank you SO much for your last post! You put a lot of effort into trying to help me "get it."

I am starting to understand a little better (hope others are as well), but I'm still having trouble getting my head around trading 17 of my dollars for one silver dollar, or $900 of my dollars for one fifty-dollar gold coin.

DH and I don't have a whole lot saved yet other than our "3-6 months emergency fund," so thinking of buying gold/silver still feels like I'd be getting a whole lot less. Kind of like when I was little, my big brother offered me 5 whole pennies for only one of my dimes! Of course, I thought it was a great deal at the time.

Another concern - if/when TSHTF, and dollars aren't worth anything, how will gold or silver coins be used? Will we have groceries priced in gold and silver? Will we be forking over 50 bucks (gold) for something that would have cost $900 in dollars? Like an even trade? I'm not saying this right...

If we had $10,000 in the bank now, and converted it all to gold coins, assuming $900/ounce, we'd have roughly 11 gold coins (1-ounce, fifty dollar coins I think). That sure doesn't sound very good to me. Whereas we once had $10,000, we now have $550?

I guess I'll have to read all this again, and do some more research to feel comfortable with investing in gold/silver. And I DO need to understand it better before I'll ever have a HOPE of convincing DH to part with our dollars!

Again, I truly appreciate your taking the time to explain this to me. Maybe I should try to find an economics class.

Be patient with me y'all, I'll get it eventually!

There use to be a rule of thumb posted around here by someone in the "know" and I forgot who it was........but......they said, if you have extra money to invest or play with then by all means buy gold and silver. The reason being that gold is notorious for taking a huge nosedive, then taking a long time to get back to it's original value and upwards.

My friends bought gold in the '70s for $250 an ounce. In 1980 or so it went up to $850. an oz. Then it started falling and never quit till it reached $300. or less. and then recently it started to dramatically climb again. My friends still have their gold today that they originally bought. Due to inflation they have made little or no money in their purchase BUT they say they're having fun just watching to see what it does. They never get emotional about it one way or the other because it's a game to them and not a matter of necessity.

By the way. They never bought another piece of gold after the '70's. Weren't interested.

If you can afford the game. Jump in!

 

[tanstaafl]

Here's another way to look at the value of a dollar over time. I've been told that $1,800 was very good money in 1900, more than enough for a father to be the only one working and support a family in a comfortable lifestyle. Now consider that those exact same silver and gold coins today would be worth about $62,000 a year (more like $90,000 a year pre-tax since there were no income taxes in 1900), which is STILL enough for a father (or mother, these days) to be the only one working and support a family in a comfortable lifestyle. It's not the gold and silver that have lost their value in the last 100 years, it's the Dollar that has lost its value.

 

[Dozdoats]

bev,

I'd be the last one here to encourage you or anyone else to do something you aren't comfortable doing with your money. It's a stretch for a lot of folks to even take enough money out of the bank in cash to bay a couple of months worth of bills. It's easy to get so locked into the 'swipe a card, pay the bill' mentality that even holding paper money seems... odd and different.

If you study on this enough it will come to you. Once you 'get it,' like anything else it will seem simple. But until understanding dawns, it's a mystery just like anything else that isn't understood.

As far as economics is concerned, DON'T take a class. If you take a class in econ these days it's 99% odds you will be taught by someone who understands only Keynesian economics. That will only confuse things more for you.

Instead go to http://www.mises.org/ and start reading there. Look for some of the books listed at your local public library. This will help give you a grounding in Austrian economics, which is what I have been trying to explain in simpler terms here.

BTW, I have never had an econ class either, and I now consider myself fortunate in that regard. Had I been 'educated' as a Keynesian, I'd now be in the same economic boat with everyone else. As it is, my undergraduate degree was in US history and I went on through graduate school to become a librarian, then worked for thirty years mostly helping people answer questions. Does it still show? 8^)

Also go to http://the-moneychanger.com/entry.phtml and read some there as well. Try http://www.solari.com/ for a woman's point of view on new financial realities. Or listen in at http://www.financialsense.com/fsn/main.html every Saturday for hours of useful discussion about the evolving state of the economy.

Don't just listen to me. There are many voices out there which can help you understand.

hth,

dd

 

[Dozdoats]

bev,

Take a look at http://www.princeton.edu/~rmcduff/Market/0807/0807.html as well. It explains the markets and currencies as priced in terms of commodities, as well as dollars. That might be helpful.

What it means in essence is turning things around backwards in your mind. Gold is $934/ounce right now, true- but then, a dollar is worth 1/934th of an ounce of gold today when thought about 'backwards.' Yet only a few years ago, a dollar was worth 1/252nd of an ounce of gold, when gold was priced at $252/ounce (July 20, 1999).

You see, it isn't gold or oil or silver or eggs that change, really. It's only the purchasing power of the dollar that changes.

Maybe that will help...

dd

 

[Milk-maid]

Dozdoats,

I think you explained that very well. It was as if I was listening to you talk and that says a lot about your writing style.

Back to the topic at hand......


I thought Russia was slowly (or not so slowly actually) building a gold reserve???

MM