I need some more ideas to prove my point to a meathead!!!

[Howeburger]

My buddy and I argue all the time about the worth of precious metals (gold / silver) over paper currency. No matter what I tell him about the history of mankind and his desire for gold, he is blind in line that Government will always take care of him. I tell him that I had read that the treasury does not even have a method of keeping track of one dollar bills anymore. I need some more pointers. Just so you know I am not trying to get him to CRH.

Thanks

Merry Christmas

 

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[BBcardsRI]

Debt as Money Part 1 of 5:



Best and fastest way to drill it in to someone's head that fiat money worthless.

~Dave

Edit: Just meant to post the link... didn't realize Tnet auto-imbeds you tube urls as videos. =(

Here is the link: http://www.youtube .com/watch?v=vVkFb26u9g8

Just deleted the space between the "e" and the "."

 

[Shake-N-Bake]

well dont take this the wrong way be here is my opinion. And this is coming from a person that hoards alot of silver and I also have a bit of gold.

Example:
Say I buy an ounce of gold today for $800. Today $800 is actually worth the $800 and the gold is actually worth $800. Next week the dollar loses value to $750, and gold gains $50 to be worth $850. When I sell the gold with the $50 gain, I receive cash money that is weaker and worth $50 less. DID I REALY GAIN ANYTHING!!!

sorry if I didnt explain it excalty right, but did the point get across.

Kinda like if your employer gives you a cost of living raise of 3% this year and cost of living went up 3%, DID YOU REALY GET A RAISE.

Jason

 

[jrf30]

well dont take this the wrong way be here is my opinion. And this is coming from a person that hoards alot of silver and I also have a bit of gold.

Example:
Say I buy an ounce of gold today for $800. Today $800 is actually worth the $800 and the gold is actually worth $800. Next week the dollar loses value to $750, and gold gains $50 to be worth $850. When I sell the gold with the $50 gain, I receive cash money that is weaker and worth $50 less. DID I REALY GAIN ANYTHING!!!

sorry if I didnt explain it excalty right, but did the point get across.

Kinda like if your employer gives you a cost of living raise of 3% this year and cost of living went up 3%, DID YOU REALY GET A RAISE.

Jason

Jason,

The answer is yes. Why yes? Because it is all based on a relative value. What I mean by that is that if you kept the money, you would have the $800 that your illlustration says you have, and it will buy what used to cost $750. If you have the gold, and then cash in the gold when it is at $850, then you have $850. And that $850 buys about $800 of what it used to. But, you have $800 based on today's current buying power instead of $750, so you are ahead. And more importantly (here comes the relativity aspect) if the rest of the world has the original $800 but you have $850 then you are ahead of the relative "norm", and that means you are ahead.

Using your wage illustration on that, if you get a 3% raise, and things also rise 3% in cost, no you are not ahead. But, you are even, and not left behind. So you are better off than not getting it, because things would still rise 3%. Relatively you stayed even. And remember that $100 is not much to go shopping with today, but it was worth a LOT of money in 1905. Why? Because $100 was a lot of money COMPARED TO WHAT PEOPLE HAD. And in 2065, if someone spent $100 for a Christmas gift, they would be called cheapskates. Because the total amount of money out there will be more, and so the value of each dollar out there is less. That is inflation, that is aggregate dollars printed and placed into circulation, and that is relativity.

So $800 is not $800. It depends on when and even WHERE you are. My wife is from Belarus. IN 2008, the average wage over there is $400 per month. And yes they pay in AMERICAN dollars. (Weird, huh?) So if someone over there made $900 in a month, they would be rich. But over here, someone making $900 a month would have a hard time paying rent in a one bedroom apartment and still feeding themselves. The same $900, and the same month. THIS month. It is relative. (And it is MY relative that is paid $400 per month! By marriage. )

It's complicated, but the bottom line is that dollars shall continue to go down in value. Mostly becasue we are flooding the market with dollars, and making it like Russia did in the early 90s. Do you remember the hyperinflation over there in 1991 and 1992? Long lines for things, even food, and no one could buy anything. It was terrible. And the rouble was devalued. Because they printed too much too fast, and did too many things to try to change from communist to a semi-democracy. It scrweed them up. Well, WE are screwing up right NOW. We used to publish the float of dollars and what was printed every month. We stopped less than a year ago. But those that know say we started printing new dollars like CRAZY right after we stopped reporting. And with the bailouts? That is a lot of new printed moey.

So, the $800 that you mention might only buy $400 of things in a few years. Hyperinflation caused 50% devaluation. Yet gold might then be worth $1,200. Are you ahead? Well, if you cash it in, you get $1,200, and that will buy you about $600 of what you could in the current days at $800 (using the same 50% devaluation of the dollar for what you get). But, since you get $1,200, and it only buys $600 worth of what it used to, and everyone else still has their $800, but it only buys $400 of what it used to, you are ahead of THEM. Ahead in dollars, AND ahead in relativity.

Ouch, now my head hurts. Anyway, that's why gold will probably be a GOOD incvestment over the next few years, and with the crazy dollar devaluation that we are doing right nOW it will outperform banks.

And if the dollar crashes? Well, then the gold an be converted in euros or yen, or the "new" dollars that come after the devaltuaiton, if there is one, and you will be FAR ahead in gold versus dollars.

Hope that helps. (NOt spell chekced, as I wrote it in a hurry and have to leave for a meeting. Ill try to spell check it when I get back if it allows me to. Gotta run...)

 

[Shake-N-Bake]

That was well put...

 

[jim4silver]

My buddy and I argue all the time about the worth of precious metals (gold / silver) over paper currency. No matter what I tell him about the history of mankind and his desire for gold, he is blind in line that Government will always take care of him. I tell him that I had read that the treasury does not even have a method of keeping track of one dollar bills anymore. I need some more pointers. Just so you know I am not trying to get him to CRH.

Thanks

Merry Christmas

The best course of action for you is to not waste you time explaining/arguing your point with a person who is not willing to listen. He will see soon enough when all the trillions being created come home to roost and we have inflation levels never before seen.

I keep trying to get a couple of close relatives of mine to put some of their money into gold or silver, and they won't listen. They have it all in CDs and think that the FDIC will keep them safe.

With the interest rate at 0-25% right now, the fed is running out of bullets to stimulate the economy. That fact compounding with all the dollars being created out of thin air via loans/TARP is setting up a future level of inflation that is unstoppable.

You may not get rich with gold or silver. But your buying power will be preserved compared to those that hold dollars.

Jim

 

[BBcardsRI]

Hope you used that $800 worth of gold amount arbitrarily and not as the current per. oz price, since gold is selling for 150-200 over spot, thus making gold worth $1,000 an once on the open market. =)

~Dave

 

[GMan00001]

Hmm....

By a similar argument if you don't want to deal with the metal markets wuoldn't it make sense to buy everything we need today using the extremely low interest debt we can get (long term credit card transfer at 1.9 or 3.9% for life and then make minimum payments and just let it sit there while the dollar deflates (if you think its going to) and then when you pay it off in a few years once it has deflated you have saved yourself quite a bit of money.

Example:
You buy $20000 worth of stuff today.
If you pay for it today it would cost you $20000.
Instead you transfer it to a fixed low interest credit card (at say 4%)
Make only the minimum payments (assume interest only for simplicity) for 5 years over which time the dollar has deflated 50% due to hyperinflation.
So you paid roughly $4000 in interest over those 5 years (0.04 * 20000 * 5) and still owe $20000
Now use the dollars earned 5 years from now to pay off the balance ($20000)
That same $20000 earned 5 years from now would have bought $30000 worth of stuff today so you would end up essentially $6000 ahead.


So, my question is if you think hyperinflation is about to occur, shouldn't you put everything you buy on fixed low interest debt and just not pay it off until you think the hyperinflationary period is over?

Now if you had the cash to pay for the debt now, you would need to transfer it into something that keeps its buying power (like gold) or else you aren't saving anything at all, but that is not what my point is about. My point/question is in a hyperinflationary period, wouldn't you want to not pay for anything immediately because the longer you wait the less you pay for what you already bought...


Note: This would only work if the rate of deflation is higher than interest you are paying.

Hope that made sense even though its not traditional logic.

 

[golden silver]

We have discussed this before. In my opinion patience is the key. You buy silver for example @ 10/oz. then the next day the dollar drops .50 cents and silver goes up 50 cents. If you sell your silver then you will getting cash money that is worth less than yesterday. So why go through all the trouble? In my opinion there is a good time to sell and that is when the silver price peaks. You can store that money in a retirement fund where it can gain even more interest and wait for the dollar to go up in value. Eventually the value of the dollar will go up. This combined with the fact that you bought silver at face value will maximize your profits. I know most will not want to sit on their money once they sell their silver. To me it is a good idea to sit on it to wait for the dollar to increase in value and also gain some more interest on your money.

-Golden Silver

 

[jim4silver]

Eventually the value of the dollar will go up. To me it is a good idea to sit on it to wait for the dollar to increase in value and also gain some more interest on your money.

-Golden Silver

I wonder if they believed the same in Zimbabwe. I would not be so confident in the future strength of our dollar based on what the fed has done with respect to liquidity injections, etc. There have been lots of fiat currencies in the past that have disappeared from existence. It could happen to our dollar too if they keep lowering interest rates and creating more dollars out of thin air over the next few years.

In a sense economics is like science, and there are cause and effect variables that will have to occur. You cannot keep printing money to throw at problems with the economy. The only way the dollar is going to go up long term is if all other major currencies go into the tank as well, which could in fact occur. But in any event holding PMs will retain the value of your holdings better than fiat in my opinion.

Jim

 

[golden silver]

You are right Jim. I too believe you are better off right now just holding on to the silver. That is what I am doing. Waiting for that rainy day or retirment. What I am refering to is selling in the future when silver has gone well above what it is now.

-Golden Silver

 

[jrf30]

Hmm....

By a similar argument if you don't want to deal with the metal markets wuoldn't it make sense to buy everything we need today using the extremely low interest debt we can get (long term credit card transfer at 1.9 or 3.9% for life and then make minimum payments and just let it sit there while the dollar deflates (if you think its going to) and then when you pay it off in a few years once it has deflated you have saved yourself quite a bit of money.

Example:
You buy $20000 worth of stuff today.
If you pay for it today it would cost you $20000.
Instead you transfer it to a fixed low interest credit card (at say 4%)
Make only the minimum payments (assume interest only for simplicity) for 5 years over which time the dollar has deflated 50% due to hyperinflation.
So you paid roughly $4000 in interest over those 5 years (0.04 * 20000 * 5) and still owe $20000
Now use the dollars earned 5 years from now to pay off the balance ($20000)
That same $20000 earned 5 years from now would have bought $30000 worth of stuff today so you would end up essentially $6000 ahead.


So, my question is if you think hyperinflation is about to occur, shouldn't you put everything you buy on fixed low interest debt and just not pay it off until you think the hyperinflationary period is over?

Now if you had the cash to pay for the debt now, you would need to transfer it into something that keeps its buying power (like gold) or else you aren't saving anything at all, but that is not what my point is about. My point/question is in a hyperinflationary period, wouldn't you want to not pay for anything immediately because the longer you wait the less you pay for what you already bought...


Note: This would only work if the rate of deflation is higher than interest you are paying.

Hope that made sense even though its not traditional logic.

Gman,

In certain countries of the world, they do just that. Today.

In Belarus many people are paid in Dollars or euros, but some are paid in Roubles too. The ones with roubles go and exchange them for dollars or euros immediately. And then they spend almost ALL the money they make. Because they know that if they buy today it will cost them $20 for a nice shirt, but if they wait, it will cost them $25 in a year, and $30 in 2 years. Because their rouble is decreasing in value and because inflation is kicking in. So if you ask anyone over there what they "save" they almost to a person say "nothing". Used things don't get very good value (Which doesn't make sense, since new things are going up in cost) but they buy and spend all they make so that they get more for their dollar. And that is how they say it too. They get more by buying now than if they wait.

So your illustration of buying now makes sense. For people in that situation. And that is what we are talking about when we say buy gold and silver now. The same thing. The value will be more later, so buy now.

There is an aritcle out that says a lot of what I was saying. I think they are TOO aggressive on some of their opinions, but this article is an interesting read. :-)

take with a grain of salt, but worth reading, IMHO. :-)

http://www.gold-eagle.com/editorials_08/maloney121908.html

I think it came out yesterday.

 

[phrostie]

agree with all the silver is rising...if he doesn't believe you get him to find coins and buy them off him!

I'm saving my silver for those food lines, when you can' t by soup and bread with the dollar my Kennedy's should still hold some value...

 

[Nick in NEPA]

There is an aritcle out that says a lot of what I was saying. I think they are TOO aggressive on some of their opinions, but this article is an interesting read. :-)

take with a grain of salt, but worth reading, IMHO. :-)

http://www.gold-eagle.com/editorials_08/maloney121908.html

I think it came out yesterday.

Interesting...

 

[golden silver]

HEY Nick, great article. I loved reading it. Sure am glad I am investing in silver right now. Thanks.

-Golden Silver

 

[Silver Sniper]

I wouldnt buy gold b/c when econmy does get better it will sink. On the other hand platinum, palladium, rhodium, and silver are all metals that have come down significantly. I would suggest investing in these PM's.

 

[Brett]

There is an aritcle out that says a lot of what I was saying. I think they are TOO aggressive on some of their opinions, but this article is an interesting read. :-)

take with a grain of salt, but worth reading, IMHO. :-)

http://www.gold-eagle.com/editorials_08/maloney121908.html

I think it came out yesterday.

Thanks for the link! Very interesting article.

I just bought his book so I can read up on all of this more. I don't wanna sit around and do nothing! Must get educated fast.