Shake-N-Bake said:
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...)
