Yes, deflating the dollar to become worthless, is called : ** “inflationary default”
**
It is still a “default”. US dollar Federal Reserve notes will still be worthless.
When you finally make your first billion, you’re automatically initialized into the Billion Dollar Club. Besides a humidor of Cuban cigars rolled in $100s, and a lovely pair of cuff links with little anchors on them, they give you a nice attaché made of baby seal skin to carry your cash around in. It also has a convenient pocket for your smartphone.
If you are the kind of person who buys only at peaks, then the Dow Jones that you bought in 1929 and which was worth 20 ounces of gold. Today, 80 years later, the Dow Jones is now worth just 9 ounces of gold…a loss of over 50%.
- the price of everything “fluctuates”, even stocks, real estate, paper money/fiat currency, and baseball cards.
- The government can take your money even if you have no money but just an income, even if your wealth is in property or real estate, even if you buy and sell stocks, even if you get interest from CD’s or Savings Bonds.
The government has “tried” to confiscate gold, but it never succeeded. No individuals ever turned in any gold, the government never went house to house to take gold, which is why old gold coins, i.e. pre 1933 gold coins, are so darn plentiful.
3. “Anything” of value, can be, and has been, stolen by criminals.
Err…I was responding to your statement that gold “holds its value”. It doesn’t, it fluctuates and if you buy at the wrong time (like now), it will loose a large chunk of its value.
What do you consider to be a “pretty physical small package”? Because were you to convert the hypothetical billion dollars to a pile of gold you’d have what appears to be 25 tons to deal with. Seems kind of big. I doubt the floors in most homes are designed to support that.
1-True, which makes gold not unique or special, it’s just another commodity.
2.True, which makes gold not unique or special, it’s just another commodity.
3.True, which makes gold not unique or special, it’s just another commodity.
Thank you for proving my point and invalidating yours. Gold is not unique or special, it’s just another commodity
I don’t think it’s “just another commodity” and its current price well above its production cost backs me up, I think. It’s not consumed like oil, so its supply and demand is almost entirely a function of some un-definable panache beyond its industrial utility. It’s true there was a very brief spike of gold in the 80s, but in the very long run gold has outperformed even nations for stability. What 500 year-old currency would you put up against gold for purchasing power?
Those of us who think the pro-gold sentiment will persist even into real crises would suggest putting part of an investment portfolio into gold; putting more than 10 or 20% doesn’t seem prudent to me.
I think the intent of the OP was not to find out how to invest wisely, though, or even to invest conservatively. I read the intent as wondering where to store such a large amount of cash as safely (and, I’d think, as liquidly) as possible.
If I were making such a decision and my horizon was short-term, TBill-based instruments are fine. Longer term I’d look to place the funds in the currencies of countries who run smaller deficits.
Does that analysis include all the dividends that were paid over all those years?
Not to mention the fact that the composition of the Dow Jones changes over time, so the idea of buying “the Dow Jones” in 1929 and holding it until 2010 is unfeasible. Of course, you could buy sa portfolio of shares composed of the same shares with the same relative weighting as in the Dow Jones, but then you’d have to reinvest each time the composition of the Dow Jones changes.
Forget all this silly investment talk.
Tell me more about these albino goats.
mmm
Here’s the question no one else asked: how liquid do you need the money to be?
If you need it to be liquid then answers would be corporate bonds, t-bills (try to buy out the Chinese), blue-chip stocks, etc. If you don’t mind the money not being available immediately, the answer is probably real estate. If you’re goal is to live off the interest then corporate bonds (liquid), rental property (illiquid and fluctuates), tax liens (guarantied rate of return but VERY illiquid). I don’t think that metals are a good buy. They rarely outpace inflation.
Personally, I would invest in hookers and gluttony in Vegas, but that’s just me.
Originally Posted by Susanann View Post
- the price of everything “fluctuates”, even stocks, real estate, paper money/fiat currency, and baseball cards.
- The government can take your money even if you have no money but just an income, even if your wealth is in property or real estate, even if you buy and sell stocks, even if you get interest from CD’s or Savings Bonds.
The government has “tried” to confiscate gold, but it never succeeded. No individuals ever turned in any gold, the government never went house to house to take gold, which is why old gold coins, i.e. pre 1933 gold coins, are so darn plentiful. - “Anything” of value, can be, and has been, stolen by criminals.
On the other hand, if you don’t tell anybody that you have it, it is not taxed, not confiscated, not stolen, doesn’t go bankrupt, and no government can ever declare it to be worthless like they do with paper money.
Gold is not just a commodity, it is also a money.
Originally Posted by Susanann
A billion dollars in gold is still a pretty physical small package.
I could easily put 2000 bars of gold down in my basement, and then put up a false wall in front of it.
Gold is not only redeemable in every country in the world, it also has been redeemable in every country in history.
You cant beat that.
Gold is not money. Your point that gold cannot be “declared worthless” by governments applies just as well to any other commodity: Wheat will always have an intrinsic value, which cannot be annulled by governments, just as well as othr commodities; but that doesn’t make wheat, or the other commodities, money.
In economic terms, money is defined simply as something that fulfils monetary functions, and the monetary functions traditionally distinguished are storage of value, unit of account, and medium of exchange. Gold may fulfil the first of these (and so do lots of other commodities), but certainly not the second and third.
Same goes for your vague “redeemability” idea. What do you mean by “redeem”? That you can sell the item in exchange for other items? That is certainly true for gold, but also for lots of other things. Or do you mean “redeem” in the sense this word is normally used for metallic currency systems like the pre-1914 gold standard, where there was a fixed relaton between gold and paper money in the sense that the issuers of paper money are legally required to exchange their banknotes for gold at a fixed rate upon demand? This is not true for gold any more.
Originally Posted by Susanann
If you are the kind of person who buys only at peaks, then the Dow Jones that you bought in 1929 and which was worth 20 ounces of gold. Today, 80 years later, the Dow Jones is now worth just 9 ounces of gold…a loss of over 50%.
I used the Dow merely to simplify a comparison, but in the real world , people buy other stocks besides the 30 stocks in the Dow. Tens of thousands of companies since 1929 have come and went. Most of the stock-held companies from 1929 are long gone and their stock certificates are worthless.
The false argument of people arguing for holding stocks, is that they cherry pick companies that exist today, and dont count all the forgotten worthless companies that most people actually bought. They look at Microsoft and they dont include the thousands of Microsoft competitors that people lost money on. Backtracking is not a valid comparison because you only include winners and leave out all the losers. People look at the price of current companies like a Microsoft or Toyota and assume that in 1929 they would have bought those companies, but in fact, they dont realize that most people back then bought stock in General Motors, Packard, Delorean, and Stanley Steamer…all of which are now just worthless pieces of paper.
Therefore, when comparing gold to stocks, then you would also have to include the tens of thousands of companies that went out of business or went bankrupt…and then yes, it would compare to a basketfull of stocks from 1929, INCLUDING companies paying dividends, INCLUDING companies that became worthless, and INCLUDING the subtracting of the taxes paid on capital gains and taxes on dividends for the past 80 years. If you invested a billion dollars in a group of stocks in 1929, then 80% of those stocks from your initial purchase have now become worthless. The stocks and dividends of the other remaining 20% were taxed over and over and over as you traded into different stocks making capital gains and as dividends were paid out.
On the other hand, none of the ounces of gold you bought back in 1929 has been taxed, nor has a single ounce of gold bought in 1929 ever went bankrupt.
No it wont.
Wheat becomes moldy and pest infested and it becomes rotten and worthless.
Let’s delve into detail on the claim that gold beats shares even including dividend payments. A good way to make that comparison is the German share index DAX, which compensates for dividens. In other words: When a company pays out a dividend, its share price drops by the amount of the dividend (because part of the share price was a premium investors added to it since the share contained the not-yet-paid dividend). DAX compensates for this by adding dividend payments, as well as bonuses etc, back into the share price and calculate the index on that basis. This methodology has been criticised, and most other major indexes don’t do it, but that’s what they do.
DAX was set up in 1988 and calibrated so that its value on December 31, 1987 was exactly 1,000 points. Gold was traded at about $485 an ounce on that day (source). Now, during the gold bubble, gold trades at about $1360 an ounce, about 2.8 times its 1987 value.
DAX, on the other hand, reached a score of 6,744 today, meaning that - including dividends and bonuses - it has 6.7 times its 1987 value.
That’s just one example, of course. But Susannan, I think if you make the point that gold performs better on the long run than shares, the burden to back this up with some data is on you.
Where am I going to store a billion dollars of copper?
How long could I live, how long can I buy food and shelter, in exchange for a pound of copper in Kenya, Hong Kong, Poland, or Thailand?