Dumb Question
Cladiator
Posts: 18,050 ✭✭✭✭✭
Can someone tell me exactly how silver (or any precious metal) can insulate and protect you from rampant inflation of the U.S. Dollar?
I mean spell it out plain and simple, the mathmatics of the thing. No opinions, predictions or personal beliefes...I'm looking for facts to illustrate the point. Pretend you're explaining it to a two year old. Thanks.
I mean spell it out plain and simple, the mathmatics of the thing. No opinions, predictions or personal beliefes...I'm looking for facts to illustrate the point. Pretend you're explaining it to a two year old. Thanks.
0
Comments
<< <i>Can someone tell me exactly how silver (or any precious metal) can insulate and protect you from rampant inflation of the U.S. Dollar?
I mean spell it out plain and simple, the mathmatics of the thing. No opinions, predictions or personal beliefes...I'm looking for facts to illustrate the point. Pretend you're explaining it to a two year old. Thanks.
Its easy. PMs are based on the dollar. Therefore, lets say that 1 ounce of gold was worth $20.67 in 1908. A very nice suit cost about $20 in that year. Lets say that Joe and Pete each had a $20 bill in 1908. Joe took his to the local bank and changed it into a St. Gaudens. Pete kept his $20 bill (note). Now both men stuffed each under their matresses. 100 years later, their great, great grandchildren both discovered the hidden money. Its now 2008. Lets completely disregard collector values and focus on what each grandkid now has. Pete's descendant has a paper and ink note embossed with $20 on it. Inflation has eaten away so badly at the original value of that note that what once bought a very nice suit at a tailor, now only buys a pair of very nice socks. Joe's descendant finds the almost 1 troy ounce of gold. Because gold has fought inflation those past 100 years, that very same amount of gold that could buy a very nice suit 100 years ago can STILL buy a very nice suit.
Understand now?
TD
Other than that, the analogy is perfect. After inflation takes hold, gold buys more paper than it used to.
<< <i>
<< <i>Can someone tell me exactly how silver (or any precious metal) can insulate and protect you from rampant inflation of the U.S. Dollar?
I mean spell it out plain and simple, the mathmatics of the thing. No opinions, predictions or personal beliefes...I'm looking for facts to illustrate the point. Pretend you're explaining it to a two year old. Thanks.
Its easy. PMs are based on the dollar. Therefore, lets say that 1 ounce of gold was worth $20.67 in 1908. A very nice suit cost about $20 in that year. Lets say that Joe and Pete each had a $20 bill in 1908. Joe took his to the local bank and changed it into a St. Gaudens. Pete kept his $20 bill (note). Now both men stuffed each under their matresses. 100 years later, their great, great grandchildren both discovered the hidden money. Its now 2008. Lets completely disregard collector values and focus on what each grandkid now has. Pete's descendant has a paper and ink note embossed with $20 on it. Inflation has eaten away so badly at the original value of that note that what once bought a very nice suit at a tailor, now only buys a pair of very nice socks. Joe's descendant finds the almost 1 troy ounce of gold. Because gold has fought inflation those past 100 years, that very same amount of gold that could buy a very nice suit 100 years ago can STILL buy a very nice suit.
Understand now?
You left out one major factor in your summation....
That $20 Note is now a collectors item worth several thousand bucks...
See this silver dollar? It's still worth what it used to be, and more! It's worth more than 10 of them worthless paper dollars, by gum.
I knew it would happen.
you can't.
you hope that PMs will keep pace with inflation, but you can't guarantee it.
www.AlanBestBuys.com
www.VegasBestBuys.com
Yes gold has been doing well recently but in 1998-2002 it was under $300 a ounce.
If you were unfortunate enough to have purchased gold in 1980 for $600 a ounce you would have had to hold on to it for 26 years to sell it for what you had bought it for. What does it cost today to buy the items listed and does it match the current price of gold?
MoneyLA has it right.
<< <i>The problem with the explanation is that the $20 sitting idle is a bad analogy as you would probably keep your money in a bank and get interest even if it dosent keep up with inflation.
Yes gold has been doing well recently but in 1998-2002 it was under $300 a ounce.
If you were unfortunate enough to have purchased gold in 1980 for $600 a ounce you would have had to hold on to it for 26 years to sell it for what you had bought it for.
MoneyLA has it right.
Its always ammusing to me when people take a TINY slice of the last 150 years to show how gold has been a "bad investment". You wanna take microscopic time slices to see how gold has done against inflation? Tell me about the guy who was fortunate to buy gold at $273 in 2000. How has he done? Your argument is weak at best.
<< <i>Its always ammusing to me when people take a TINY slice of the last 150 years to show how gold has been a "bad investment". You wanna take microscopic time slices to see how gold has done against inflation? Tell me about the guy who was fortunate to buy gold at $273 in 2000. How has he done? Your argument is weak at best. >>
Glad I could ammuse you. If you can foretell the future and know that now is the right time (price) to buy more power to you.
You could have made your post in 1981 and say look how did the guy did that bought in 1975.
If you dont like small time frames look at how gold did from 1990-2000 thats 10 years of pretty small price changes.
Btw I never said gold was a bad investment. My point was it can be one if you buy at the wrong time and or sell at the wrong time.
<< <i>
<< <i>Its always ammusing to me when people take a TINY slice of the last 150 years to show how gold has been a "bad investment". You wanna take microscopic time slices to see how gold has done against inflation? Tell me about the guy who was fortunate to buy gold at $273 in 2000. How has he done? Your argument is weak at best. >>
Glad I could ammuse you. If you can foretell the future and know that now is the right time (price) to buy more power to you.
You could have made your post in 1981 and say look how did the guy did that bought in 1975.
If you dont like small time frames look at how gold did from 1990-2000 thats 10 years of pretty small price changes.
Btw I never said gold was a bad investment. My point was it can be one if you buy at the wrong time and or sell at the wrong time. >>
Instead of taking "snipets" of time to suit our agendas, why dont we look at it as a whole picture. Since its inception in 1913, the FEDERAL RESERVE has erroded the power of the U.S. dollar by 96%. Thats right, 4 cents in 1913 would get you what a dollar does today. Gold has INCREASED in value by 40 times in that same time period! Bury your head in the sand if you must, but if you think sitting on a stack of manmade paper is better than sitting on a stack of LIMITED precious metals, by all means, load up on dollars!
<< <i>
<< <i>
<< <i>Its always ammusing to me when people take a TINY slice of the last 150 years to show how gold has been a "bad investment". You wanna take microscopic time slices to see how gold has done against inflation? Tell me about the guy who was fortunate to buy gold at $273 in 2000. How has he done? Your argument is weak at best. >>
Glad I could ammuse you. If you can foretell the future and know that now is the right time (price) to buy more power to you.
You could have made your post in 1981 and say look how did the guy did that bought in 1975.
If you dont like small time frames look at how gold did from 1990-2000 thats 10 years of pretty small price changes.
Btw I never said gold was a bad investment. My point was it can be one if you buy at the wrong time and or sell at the wrong time. >>
Instead of taking "snipets" of time to suit our agendas, why dont we look at it as a whole picture. Since its inception in 1913, the FEDERAL RESERVE has erroded the power of the U.S. dollar by 96%. Thats right, 4 cents in 1913 would get you what a dollar does today. Gold has INCREASED in value by 40 times in that same time period! Bury your head in the sand if you must, but if you think sitting on a stack of manmade paper is better than sitting on a stack of LIMITED precious metals, by all means, load up on dollars! >>
I understand your point. I guess you dont undertand mine.
Depending when you bought and when you sold you could have either made or lost money with gold and that is a fact.
And as far as sitting on stacks of paper well if you have enough stacks you can live off the interest and never change the amount you have something you cant do with pms as you have to sell it to use it as money.
I can offer no better witness than George Washington. In a letter to Jabez Bowen, deputy governor of Rhode Island, he wrote: ''Paper money has had the effect in your State that it ever will have, to ruin commerce -- oppress the honest, and open a door to every species of fraud and injustice.'' That's at the bottom of this page from that letter:
The framers of the Constitution specified gold and silver coin as money because they knew the consequences of using anything else. What gold is worth, or how many dollars it takes to buy something is interesting to discuss, but if history repeats itself, those holding gold instead of paper will have the last laugh.
my early American coins & currency: -- http://yankeedoodlecoins.com/
MoneyLA has it right.
Money LA lives in a bubble as much as any pm investor ever did. How many people do you know who bought gold in 1980 and still have the same stash sitting there?
Do you still have the same stock portfolio that you did in 1980?
Gold investors don't live in the past, nor in a vacuum. You buy in and take a position over time. You sell on opportunities. You analyze the data and you see which way the wind is blowing.
At least you aren't being fed a constant diet of pablum by stockbroker analysts who have a total interest in hyping the stock of the day which also happens to be a client of the same brokerage house.
I knew it would happen.
Also, paper money was widely counterfeited and everyone was scammed by this stuff, kinda like the paper folk still pass around today. I think the books name was A Nation of Counterfeiters but I would have to look in the book case to be sure. Folk even accepted counterfeit notes for payment but at a discount. Backing with gold or silver was the only way to stabilize our currency which at the time was just paper issued by anyone with a printing press. We could never tie any currency to hard assets again because it would collapse the banks. Now, our currency is backed by the full faith of something but it has no actual asset backing the paper, just faith.
<< <i>We could never tie any currency to hard assets again because it would collapse the banks. >>
That looks like it will happen anyway.
my early American coins & currency: -- http://yankeedoodlecoins.com/
1907 would be over 1000 dollars.
compound interest is amazing.
how about a few shares of cocacola when it became available back
then?
it would blow away any investment in gold...
etc... etc...
--------
to answer the question.. i think gecko did well.
<< <i>20 dollars put into a bank account paying an average 4% since
1907 would be over 1000 dollars.
compound interest is amazing.
how about a few shares of cocacola when it became available back
then?
it would blow away any investment in gold...
etc... etc...
--------
to answer the question.. i think gecko did well. >>
Too bad most companies go out of business and their stocks go to zero. How many stocks that you could buy in 1907 are still available today?
<< <i>20 dollars put into a bank account paying an average 4% since
1907 would be over 1000 dollars. >>
Not true if the bank failed in 1932.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
<< <i>
<< <i>Its always ammusing to me when people take a TINY slice of the last 150 years to show how gold has been a "bad investment". You wanna take microscopic time slices to see how gold has done against inflation? Tell me about the guy who was fortunate to buy gold at $273 in 2000. How has he done? Your argument is weak at best. >>
Glad I could ammuse you. If you can foretell the future and know that now is the right time (price) to buy more power to you.
You could have made your post in 1981 and say look how did the guy did that bought in 1975.
If you dont like small time frames look at how gold did from 1990-2000 thats 10 years of pretty small price changes.
Btw I never said gold was a bad investment. My point was it can be one if you buy at the wrong time and or sell at the wrong time. >>
You ask 'how do I know when is a good time for Gold or Stocks?'
Simple....see below chart.
If you need this explained, please ask.
gold coins can be lost due to a fire of your home or place of safe
keeping!
geez.. poking holes is so much fun... ;-)
<< <i>gold coins can be lost due to a fire of your home or place of safe >>
An ounce of gold is an ounce of gold. Whether it's in the form of a nice struck bullion coin or a bar or a charred and melted blob it's still an ounce of gold.
<< <i>Btw I never said gold was a bad investment. My point was it can be one if you buy at the wrong time and or sell at the wrong time. >>
You ask 'how do I know when is a good time for Gold or Stocks?'
Simple....see below chart.
If you need this explained, please ask. >>
The problem with using charts like this is knowing when they no longer apply.
For example, your chart doesn't cover any periods of currency collapse. I'm not saying it's going to happen, but if it does, this chart won't do you much good.
It's only been the past 20 or so years where the US has really lost control of the value of its currency. I'm not talking about the printing and spending either. What I mean is that the US no longer controls the value of the dollar because so many dollars are now held by other countries. Other countries, particularly China, could sink the dollar if they wanted to. If they lose faith in the US, the dollar is done.
<< <i>
<< <i>Btw I never said gold was a bad investment. My point was it can be one if you buy at the wrong time and or sell at the wrong time. >>
You ask 'how do I know when is a good time for Gold or Stocks?'
Simple....see below chart.
If you need this explained, please ask. >>
The problem with using charts like this is knowing when they no longer apply.
For example, your chart doesn't cover any periods of currency collapse. I'm not saying it's going to happen, but if it does, this chart won't do you much good.
It's only been the past 20 or so years where the US has really lost control of the value of its currency. I'm not talking about the printing and spending either. What I mean is that the US no longer controls the value of the dollar because so many dollars are now held by other countries. Other countries, particularly China, could sink the dollar if they wanted to. If they lose faith in the US, the dollar is done. >>
Your reasoning fits perfectly with the chart.
We are in a major down trend of falling Stock prices and rising gold prices.
Many factors (time line, inflation, weak US dollar, economic mess) confirms this.
<< <i>
<< <i>gold coins can be lost due to a fire of your home or place of safe >>
An ounce of gold is an ounce of gold. Whether it's in the form of a nice struck bullion coin or a bar or a charred and melted blob it's still an ounce of gold.
i guess that assumes it did not melt into the cracks of the structure
and basically lost forever. for example, kept under the mattress or
in a wood box on a dresser... or hidden in an old jacket in the closet.
if kept in a safe.. sure.. i could see someone scraping up the blob ;-)
but anyway.. i still think gecko did the best simplest explanation.
<< <i>
<< <i>
<< <i>gold coins can be lost due to a fire of your home or place of safe >>
An ounce of gold is an ounce of gold. Whether it's in the form of a nice struck bullion coin or a bar or a charred and melted blob it's still an ounce of gold.
i guess that assumes it did not melt into the cracks of the structure
and basically lost forever. for example, kept under the mattress or
in a wood box on a dresser... or hidden in an old jacket in the closet.
if kept in a safe.. sure.. i could see someone scraping up the blob ;-)
but anyway.. i still think gecko did the best simplest explanation. >>
That's why I store all my silver and gold coins in individual porcelyn crucibles, dusted with some flux. After a fire I can cut open the safe and retrieve all the perfectly formed gold and silver blobs.
Few other things would exist to continue a burn to the temps that silver and particularly gold will melt at.
If you really want something that isn't going to turn into a blob, try platinum.
No house fire would melt either of the three and I can't imagine much more than an industrial furnace, and a very hot one at that, that could touch platinum.
Going from memory, you can google me and take me to task later, silver melts at over 1700 degrees F., gold at around 2400 F. and platinum is around 4300 F.
The house is long gone well before any of those temps are going to be reached.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
now list how many times at any time did the gov do what it's doing now with the bailout's
now let's talk metals
<< <i>this is a Great thread
now list how many times at any time did the gov do what it's doing now with the bailout's
now let's talk metals >>
chrysler was bailed out before by the govt and we the people actually
made money on the deal... but only a measily billion or two was given
out.
The savings and loan crisis of the 1980s and 1990s (commonly referred to as the S&L crisis) was the failure of 747 savings and loan associations (S&Ls) in the United States. The ultimate cost of the crisis is estimated to have totaled around $160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government—that is, the U.S. taxpayer, either directly or through charges on their savings and loan accounts[1]—which contributed to the large budget deficits of the early 1990s.
soooo it has happened before quite a few times.
<< <i>Airlines bailouts of 2002 >>
i bet amtrak has been getting money for decades.
how about the subsidies for farmers and all the rest of that type
of handouts.
● Lockheed 1971 In August 1971, Congress passed the Emergency Loan Guarantee Act, which could provide funds to any major business enterprise in crisis. Lockheed was the first recipient. Its failure would have meant significant job loss in California, a loss to the GNP and an impact on national defense. (What happened after the bailout?) $1.4 billion
● Franklin National Bank 1974 In the first five months of 1974 the bank lost $63.6 million. The Federal Reserve stepped in with a loan of $1.75 billion. (What happened after the bailout?) $7.8 billion
● New York City 1975 During the 1970s, New York City became over-extended and entered a period of financial crisis. In 1975 President Ford signed the New York City Seasonal Financing Act, which released $2.3 billion in loans to the city. (What happened after the bailout?) $9.4 billion
● Chrysler 1980 In 1979 Chrysler suffered a loss of $1.1 billion. That year the corporation requested aid from the government. In 1980 the Chrysler Loan Guarantee Act was passed, which provided $1.5 billion in loans to rescue Chrysler from insolvency. In addition, the government's aid was to be matched by U.S. and foreign banks. (What happened after the bailout?) $4.0 billion
● Continental Illinois National Bank and Trust Company 1984 Then the nation's eighth largest bank, Continental Illinois had suffered significant losses after purchasing $1 billion in energy loans from the failed Penn Square Bank of Oklahoma. The FDIC and Federal Reserve devised a plan to rescue the bank that included replacing the bank's top executives. (What happened after the bailout?) $9.5 billion
you win now let's the same bailouts in the same Year
you start
isn't were we want to go is it
you have anything else you want to say fc
were all alll ears
and tell me or my grandkids who is paying them off
<< <i>● Penn Central Railroad 1970 In May 1970, Penn Central Railroad, then on the verge of bankruptcy, appealed to the Federal Reserve for aid on the grounds that it provided crucial national defense transportation services. The Nixon administration and the Federal Reserve supported providing financial assistance to Penn Central, but Congress refused to adopt the measure. Penn Central declared bankruptcy on June 21, 1970, which freed the corporation from its commercial paper obligations. To counteract the devastating ripple effects to the money market, the Federal Reserve Board told commercial banks it would provide the reserves needed to allow them to meet the credit needs of their customers. (What happened after the bailout?) $3.2 billion
● Lockheed 1971 In August 1971, Congress passed the Emergency Loan Guarantee Act, which could provide funds to any major business enterprise in crisis. Lockheed was the first recipient. Its failure would have meant significant job loss in California, a loss to the GNP and an impact on national defense. (What happened after the bailout?) $1.4 billion
● Franklin National Bank 1974 In the first five months of 1974 the bank lost $63.6 million. The Federal Reserve stepped in with a loan of $1.75 billion. (What happened after the bailout?) $7.8 billion
● New York City 1975 During the 1970s, New York City became over-extended and entered a period of financial crisis. In 1975 President Ford signed the New York City Seasonal Financing Act, which released $2.3 billion in loans to the city. (What happened after the bailout?) $9.4 billion
● Chrysler 1980 In 1979 Chrysler suffered a loss of $1.1 billion. That year the corporation requested aid from the government. In 1980 the Chrysler Loan Guarantee Act was passed, which provided $1.5 billion in loans to rescue Chrysler from insolvency. In addition, the government's aid was to be matched by U.S. and foreign banks. (What happened after the bailout?) $4.0 billion
● Continental Illinois National Bank and Trust Company 1984 Then the nation's eighth largest bank, Continental Illinois had suffered significant losses after purchasing $1 billion in energy loans from the failed Penn Square Bank of Oklahoma. The FDIC and Federal Reserve devised a plan to rescue the bank that included replacing the bank's top executives. (What happened after the bailout?) $9.5 billion >>
That's a good list, probably very incomplete through no fault of your own.
BTW, I seem to remember a 60 Minutes show that was focused on Amtrak earlier this year. We are indeed subsidizing them to the tune of several bill a year.
Here's the kicker, they are experiencing a greater number of passengers(expected in this economy) and while they have the capacityand the trains to add thousands of fares per day, Congress has refused to give them the funds to hire the needed people for the additional fares. Now get this; right now they lose a bit of money each year, hence the subsidies over the years. However, if they add the extra fares to the system, they will become an extremely profitable enterprise. The monkeys in DC have no clue as to how to handle a profit in the system, it simply isn't in place in the charter.
So, for now, it will be tough to find a seat for the folks in the East Coast and we will continue to subsidize a system that won't put half of their toys into operation.
Our system has been ruined in a way that will make history, we put morons into power and never followed up with any sort of transparency/auditing system to take care of the really stupid or greedy ones. Combined, they have left us with a disaster that no one can put a handle on and one that is going to put us through Hell for at least the next few years. "Yes We Can" put ourselves into a decade long depression depending on what our Congresscritters decide to do in the next 6 months.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
you hope that PMs will keep pace with inflation, but you can't guarantee it.
It is guaranteed. Absolutely. It's just that it's hard to guess when metals catch up following periods of heavy govt interventions. The simple thing is that monetary inflation leads to price inflation....ALWAYS. It can be delayed and buffered through temporary and short-sighted govt policies, but it always comes back. The US fiat experiment is only 37 years old, not 50, 100, or even 200 years old. We've had but ONE single tussle against a stagflationary environment in the 1970's. Welcome to round 2. The gold bugs were right back decades ago. They just underestimated the resolve and greed of Wall Street and Congress to keep pushing their fiat agenda until it literally broke the system. The methods that have kept gold and silver at bay from the later 80's to date, is slowly grinding to a halt. I tip my hat to the legal (and illegal) methods that the FED and Treasury have concocted to keep their friends from losing their stolen wealth. the final irony is that all they have succeeded in doing is ensuring that the final reckoning will be far, far worse than if they had accepted the medicine back in 2000-2002 and began flushing out the ills of the economy at that time.
20 dollars put into a bank account paying an average 4% since
1907 would be over 1000 dollars. compound interest is amazing.
how about a few shares of cocacola when it became available back
then? it would blow away any investment in gold...
Sure, and they we can interject the John Clapps of the world who took rolls of fresh US coins and put them away (rolls of 1901-s quarters, 1914-d pennies, 1916 quarters, etc.). Those would in effect blow away anything in stocks. Your point of an isolated stock is as silly as anything. Only a couple of stock companies are left from the 1929 DOW. The rest went belly up. For every Coca-Cola that lasted this long, you have a pile of companies that are defunct.
Forget about 1907, this is 2008. 100% different worlds. Go ahead and stash your cash in the bank long term and get 3-6% while inflation rages at a higher amount. A one way ticket to loser-ville. None of us has the chance to go back to 1907 and wait 100 years to accept our "cash-pile." How many money managers have directed their clients to stay in cash since 1970-1980? Or even since 1990? Case closed. In fact during 2008, one of the worst times in the past 30 years where people should have been holding cash, how many CFP's have had their clients in pure cash? Yeah, case closed again. How irrelevant is it to compare the gold-backed world of 1907 to the pure-fiat-1 Quadrillion $$ derivatives world of 2008?
Simple rule to follow...our current financial world really started in 1971. Comparisons prior to that are a tough sell. But I do get a good laugh when the 50-100 year gold chart is trotted out considering we've been floating adrift since 1971. Focus on today and the past 7 years of the current economic cycle....that's reality. Buy and hold cash, stocks, etc forever? That went out of the picture with hedge funds and otc derivatives. New world my friend.
gold coins can be lost due to a fire of your home or place of safe
keeping! geez.. poking holes is so much fun..
You know, I've been reading the forum gold threads for 4 years now. And if this is the current level of analysis and critical thinking, we've sunk to a new low. I'm almost speechless, really!......I guess cash doesn't burn, nor do homes, paintings, antiques, paper collectables of all types, collector cars, jewelry, furs, collector Libraries, and a host of other hard assets. Hmm, looks like fc doesn't believe insurance companies exist anymore either. What in heaven's name did all the sheeple do from 1776 to 1971 with their gold and silver coins? How can we ever go on now that fc has shone the light on the "soft underbelly" and well kept dirty secret of the metal's market.....the melting point! Ok guys, start emptying your houses of all collectable and valuable combustables and ignitables. fc will be setting up free insurance inspections from your local fire marshall to ensure compliance.
roadrunner
It boggles my mind that people can't comprehend the future event of mass inflation and hence very high precious metals prices.
It's a LAW of Economics that has never been proven false. That is, with mass inflation (definition: the excess printing of money; NOT rising prices) you will DEBASE one's currency.
By definition, we have mass inflation (although the full effects of it have not happened) - We will therfore debase the currency further - And therefore Gold and Silver (alongwith most every other tangible 'asset') will rise.
As I said before, I'm honestly scared for people who hold their life savings in Cash. They could lose it all.
<< <i>20 dollars put into a bank account paying an average 4% since
1907 would be over 1000 dollars.
compound interest is amazing.
how about a few shares of cocacola when it became available back
then?
it would blow away any investment in gold...
etc... etc...
--------
to answer the question.. i think gecko did well. >>
Nah, that's not necessarily true, the devil's in the details. You would get charged 25% (just federal) tax or thereabouts, reducing your effective income to something like 3% unless you automatically had it roll back into a CD to avoid the taxes. At that rate you would have $384 in 100 years. That is 47% of today's gold value. There are also state and local taxes now which add to quite a bit more.
In addition, you are not being compensated for risk which should provide more interest in a normal financial environment. For example, you may have lost your entire principal in 1929 depending on where you had it.
From a "buy and hold" standpoint, I think the best investment would have been to keep the original $20 gold piece in pristine condition, which would have been worth quite a bit more than the gold value numismatically, right?
Also, why would you hold dollars or gold for 100 years? You don't marry gold and silver, you date it and move to other mistresses when times get better. IMO moving in and out of stocks and metals are the correct time would produce hundreds of times the amount of money that you are talking about, even with taxes considered.
I agree that the very best investment strategy is to move in and out of the Gold/Stock markets in accordance with the Bull Cycles.
But, if you had only One asset class to invest in over a period of 50 years and you could not move the investment for this time period. What Would you invest in given the three choices below:
1. Cash
or
2. Stocks (DJIA)
or
3. Gold.
Personally, I think it's a no brainer answer.
3. Gold.
Remember this, the key to investing is to PRESERVE one's wealth over time, not to go after big high risk profits every year. The last couple of months should have proven my point.
I agree that the very best investment strategy is to move in and out of the Gold/Stock markets in accordance with the Bull Cycles.
-----------
so here we are back to a sane managed portfolio that contains a bit
of everything that makes sense for the timeframe we are speaking
of.
it is like reading a financial magazine at the end ;-)
------------
oh and roadrunner... you must have missed the sarcasm. it was a joke. the discussion was just trying to name a few things since 1907
that did well. compound interest is one... a long time stock... a gold
coin... a piece of property...
just naming some stuff and throwing it out there. of course any one thing will never work all the time. if people can poke
a hole in compound interest... i thought it would be humorous to poke
a hole in owning a gold coin.
<< <i>I melted a clad quarter in a fireplace fire once. No idea of the melting temps of the various metals in one of them tough. Looked cool.
I had to know the answer to this. Given the alloy in a clad quarter, it would become soft and start to melt at just below 800 degrees F.
That is not out of the question for hardwood coals, still a pretty hot fireplace.
I'd think it would have taken some time, several minutes at least.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>
<< <i>I melted a clad quarter in a fireplace fire once. No idea of the melting temps of the various metals in one of them tough. Looked cool.
I had to know the answer to this. Given the alloy in a clad quarter, it would become soft and start to melt at just below 800 degrees F.
That is not out of the question for hardwood coals, still a pretty hot fireplace.
I'd think it would have taken some time, several minutes at least. >>
I didn't time it but I'd say more than 10 and less than 15. I put it right on top of a big hot coal and when it melted the inner core melted first. The inner part dripped out of the shell and rolled down the side of the coal. The outer shell melted shortly after that and just sat on the coal in a tiny liquid blob.
I think the key to investing is to achieve a growth rate that outpaces inflation. Cash, CD's etc. fall behind inflation, and pm's track it. None of those are investments. Wealth preservation sounds good in turbulent times, but in the long run it's just treading water.