OTOH, the value of the U.S. dollar, the Federal Reserve note, has went steadily down for 100 years. It is a guaranteed loss. There is no up-and-down for the dollar, it is only, and always, down.
Any investment that is dollar-denominated or dollar-dependent will likewise of course also lose its real value unless and only unless it can appreciate faster than obama can print more Federal Reserve notes, and after taxes.
When you choose an investment you must be convinced that after taxes that the investment you choose will go up more, and faster, than obama can spend. Go for it!
The correct statement should be:
** the value of the US dollar is at its LOWEST price ever.**
The US dollar is now just worth 1/1600 of an ounce of gold.
Gold is not up. The dollar is down.
Gold has not changed since 1912. When the Federal Reserve was created, the value of the dollar was 1/20th of an ounce of gold. Since the creation of the Federal Reserve, the true value of gold has not changed single 1 bit, but instead, the value of the U.S. dollar lost 99% of its value.
As far as the future, one must decide for himself if the government will continue to inflate and if the dollar will continue as it has for the past 100 years to lose its value.
It is as simple as that. If federal deficits continue, then " at some time in the future" the dollar will be worth less in gold. In the future, how many dollars it is going to take to buy 1 ounce of gold is entirely dependent on if we continue to have deficits and if we continue to have inflation.
The flaw in the major point is that it is slanted and being applied with invalid logic.
If, instead of buying the gold or a car in the 1920’s you just put the equivalent cash in a box, and today you opened that box would the cash be able to buy a new car or the same amount of gold?
Hedging your wealth against inflation and rising costs of living is investing. Investing in commodities can be high risk and is usually done by people who do want to buy low and sell high frequently as opposed to just sitting on it. But the examples you are giving about equivalent values today being based on how how many cars or rifles it could buy is actually saying it was a good investment.
Apparently, it will also fluctuate when the price of gold is denominated in “new cars”.
Even granting you the factor of two you give yourself, the price of an entry-level new car in 2000 was generously on the order of 50 ounces of gold, with a “nice” one even higher. If order-of-magnitude fluctuations are “inconsequential”, then it’s hard to think of anything that isn’t.
OK, then, maybe the “gold” concept is bedazzling everyone, maybe the “gold” concept is easier to understand by using a shorter time frame smaller denomination simple example of an every day silver quarter coin. Lets make it easier to understand.
If instead of buying 1 gallon of gas in 1962, you instead put that quarter in a box and stored it away somewhere back in 1962, then that same quarter today will still buy 1 gallon of gas.
It’s wrong to act as if a person must chose either gold or the dollar. Yes, if you just held paper money the purchasing power of your 1913 dollar would be about $0.03. However, if you invested your dollar in ultra-safe T-bills, it would be worth $1.41. If you put it into US 10-year bonds it would be worth $5.05. If you invested in US stocks… $271.
No, gold is up. It’s at record levels against the Euro, record levels against pound-sterling, it’s high against the yen, it’s high against the Australian dollar, it’s up against most assets. It’s up against nearly everything, and that’s the only way to measure whether it’s “up” or “down”. One reason it’s so high at the moment is because it’s seen as a safe-haven investment in uncertain economic times, when a lot of investments look potentially risky.
To the OP: I wouldn’t recommend investing in one of those companies you see advertised on TV, they look dodgy at best. If you want to invest in gold in traditional means, through stock brokers or online brokerages, the question of whether it’s a good investment is not really one you should be seeking an answer for on a message board - there’s no easy answer, it’s like any other investment.
I hadn’t thought about that, but it’s a good point. How does it benefit Goldline to spend millions of dollars advertising gold sales, when in theory it should be a low-margin business?
More importantly, “stored cash” is specifically designed to *not * be an investment vehicle. The Federal Reserve (and most national central banks) specifically target a 1-3% inflation rate with the intention that hoarding cash does not become a viable investment strategy. They do this because when hoarding cash does become a viable investment strategy, pretty much all incentive for doing productive economic activity stops, and we get fun things like the great depression.
Gold bugs saying “gold is a better investment than a box full of cash”, is like me saying “Dr. Pepper tastes better than house paint”. If I want to make a meaningful statement about the taste of Dr. Pepper, I’d better compare it to other drinks, not to things that are not meant to be drunk.
Irrelevent. T-bills and 10-year bonds bought today in 2011 will be worthless after another 100 trillion in debt and after the US dollar collapes. Zero is your expected return today in US dollar denominated bonds.
As far as stocks, we covered this many time before. You are using backward logic. Those stock statistics touted by stock salesmen are overly inflated, do not count income taxes on every transaction, and also are selective because they dont include all the stocks that became worthless when the companies went bankrupt. Most of the companies that most people bought stock in back in 1912 do not exist anymore, the stock is worthless. You cant backtrack and only look at the winners, only look at stock indexes of companies that exist today and ignore all the Pennsylvania Railroads and all the K-Marts that have disappeared leaving their investors broke. Your stock statistics are not including the losers nor income taxes.
Most stock, of most companies, becomes worthless, because most companies go out of business. There are very few companies today that still exist after 100 years. If you find any stock that grandpa bought in 1912 most likely it is worthless. Only 1 out of 100 companies manage to stay in business just for 10 years. Investing in 99 of them will leave you penniless. Even if you just look at all the companies that were in business in 1929, most of those company’s stock is worthless.
Even more recently, most people, even most people here on Straight Dope, did not buy Mircosoft in 1975, they instead bought stock in all the others that went out of business.
That is a guaranteed loss. Exponentially, cummulatively, with 3 % inflation over the years, it does not take very long to lose most of what you have.
However, 1-3% inflation is small potatoes, with todays huge deficits, future inflation is going to be much more than the inflation we had back in the Carter year’s.
If you really believe that, why don’t you just borrow as much as you possibly can in 2011 dollars at today’s low interest rate, put it into whatever inflationary hedge you’d like (like gold), and then, when we have our wild inflation, make out like a bandit?
Quote:
Originally Posted by Susanann
If instead of buying 1 gallon of gas in 1962, you instead put that quarter in a box and stored it away somewhere back in 1962, then that same quarter today will still buy 1 gallon of gas.
A 1962 silver quarter that would have bought a gallon of gas in 1962 will still buy a gallon of gas today.
Is this because of the numismatic value of a 50-year-old silver quarter, or because of the current market value of the mass of precious metal contained in the coin?
