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What to Do When – Not If – Inflation Gets Out of Hand (Publisher Recommended)

What to Do When – Not If – Inflation Gets Out of Hand (Publisher Recommended)


Written by
Jeff Clark
Date: 09-04-2012
Subject: Casey Research Articles

(Publisher: Very Useful Charts)
 
The cheek of it! They raised the price of my favorite ice cream.

Actually, they didn't increase the price; they reduced the container size.

I can now only get three servings for the same amount of money that used to give me four, so I'm buying ice cream more often.

Raising prices is one thing. I understand raw-ingredient price rises will be passed on.

But underhandedly reducing the amount they give you… that's another thing entirely. It just doesn't feel… honest.

You've noticed, I'm sure, how much gasoline is going up.

Food costs too are edging up.

My kids' college expenses, up.

Car prices, insurance premiums, household items – a list of necessities I can't go without. Regardless of one's income level or how tough life might get at times, one has to keep spending money on the basics. (This includes ice cream for only some people.)

According to the government, we're supposedly in a low-inflation environment. What happens if price inflation really takes off, reaching high levels – or worse, spirals out of control?

That's not a rhetorical question. Have you considered how you'll deal with rising costs? Are you sure your future income will even keep up with rising inflation?

Be honest: will you have enough savings to rely on? What's your plan?

If price inflation someday takes off – an outcome we honestly see no way around – nobody’s current standard of living can be maintained without an extremely effective plan for keeping up with inflation.

It's not that people won't get raises or cost of living adjustments at work, nor that they will all neglect to accumulate savings.

It's that the value of the dollars those things are in will be losing purchasing power at increasingly rapid rates. It will take more and more currency units to buy the same amount of gas and groceries and tuition. And ice cream.

I'm not talking science fiction here.

When the consequences of runaway debt, out-of-control deficit spending, and money-printing schemes come home to roost, it's not exactly a stretch to believe that high inflation will result.

We need a way to diffuse the impact this will have on our purchasing power. We need a strategy to protect our standard of living.

How will we accomplish this?

I suspect you know my answer, but here's a good example. You've undoubtedly heard about the drought in the Midwest and how it's impacted the corn crop. The price of corn has surged 50% in the past two months alone.

Commodity analysts say the price could rise another 20% or more as the drought continues.

(Click on image to enlarge)

While the price of gold constantly fluctuates, you would have experienced, on average, no inflation over the last 30 years if you'd used gold to purchase corn. Actually, right now, it'd be on the cheap side.

When you extrapolate this to other food items – and virtually everything else you buy – it's very liberating. Think about it: gold continues its safe-haven role as a reliable hedge against rising inflation.

I believe that those who save in gold will experience, on average, no cost increases in the things they buy and the services they use.

Their standard of living would not be impacted.

I think this kind of thinking is especially critical to adopt when you consider that supply and demand trends for gas and food dictate that prices will likely rise for a long time, and perhaps dramatically.

So how much will you need to make it through the upcoming inflation storm and come out unscathed?

Like all projections, assumptions abound. Here are mine for the following table. I'm assuming that:

---The price of gold, on average and at a minimum, tracks the loss in purchasing power of whatever currency you use, and that it does so from current prices. Given gold's history, this is an easy assumption to make.
---Gold sales, over time, capture the gain in gold and silver so that your purchasing power is preserved. (This doesn't mean I expect to sell at the top of the market; I expect we'll be selling gold as needed – if gold has not itself become a widely accepted currency again.)
---We pay taxes on the gain. This will decrease our net gain, but there should still be gains. In the famous Weimar Germany hyperinflation, gold rose faster than the rate of hyperinflation.

To calculate how much we'll need, I looked at two components, the first being average monthly expenses. What would we use our gold and silver for? From corn to a house payment, it could be used for any good or service. After all, virtually nothing will escape rising inflation. Here are some of my items: groceries, gas, oil changes and other car maintenance, household items, eating out, pool service, pest service, groceries and gas again, eating out again, vitamins, movie tickets, doctor appointments, haircuts, pet grooming, kids who need some cash, gifts, and groceries and gas yet again. Groceries include ice cream, in my case. How many ounces of gold would cover these monthly expenses today?

And don't forget the big expenses – broken air conditioner, new vehicle, vacation… and I really don't think my daughter will want to get married at the county rec hall. How many ounces of gold would I need to cover such likely events in the future?

The point here is that you're probably going to need more ounces than you think. Look at your bank statement and assess how much you spend each month – and do it honestly.

The other part of the equation is how long we'll need to use gold and silver to cover those expenses. The potential duration of high inflation will dictate how much physical bullion we need stashed away. This is also probably longer than you think; in Weimar Germany, high inflation lasted two years – and then hyperinflation hit and lasted another two. Four years of high inflation. That's not kindling – that's a wildfire roaring through your back yard.

So here's how much gold you'll need, depending on your monthly expenses and how long high inflation lasts.

Every corn-based product on the grocery shelf will soon take a lot more dimes and dollars to buy. But wait – what if I used gold to buy corn?

Ounces of Gold Needed to Meet Expenses During High Inflation
Monthly expenses in US dollarsMonthly expenses in gold, oz*Inflation Duration
6 months 1 year 18 months2 years3 years4 years5 years 
$500
0.31
1.9
3.7
5.6
7.5
11.2
15.0
18.7
$1,000
0.63
3.8
7.5
11.3
15.0
22.5
30.0
37.5
$2,000
1.25
7.5
15.0
22.5
30.0
45.0
60.0
75.0
$3,000
1.88
11.3
22.5
33.8
45.0
67.5
90.0
112.5
$4,000
2.50
15.0
30.0
45.0
60.0
90.0
120.0
150.0
$5,000
3.13
18.8
37.5
56.3
75.0
112.5
150.0
187.5
$10,000
6.25
37.5
75.0
112.5
150.0
225.0
300.0
375.0
$20,000
12.50
75.0
150.0
225.0
300.0
450.0
600.0
750.0
*Based on $1,600 gold price

If my monthly expenses are about $3,000/month, I need 45 ounces to cover two years of high inflation, and 90 if it lasts four years. Those already well off or who want to live like Doug Casey should use the bottom rows of the table. How much will you need?

Of course many of us own silver, too. Here's how many ounces we'd need, if we saved in silver.

Ounces of Silver Needed to Meet Expenses During High Inflation
Monthly expenses in US dollarsMonthly expenses in silver, oz*Inflation Duration
6 months 1 year 18 months2 years3 years4 years5 years 
$500
17.9
107.1
214.2
321.3
428.4
642.6
856.8
1,071.0
$1,000
35.7
214.3
428.5
642.8
857.0
1,285.6
1,714.1
2,142.6
$2,000
71.4
428.5
857.0
1,285.6
1,714.1
2,571.1
3,428.2
4,285.2
$3,000
107.1
642.8
1,285.7
1,928.5
2,571.4
3,857.0
5,142.7
6,428.4
$4,000
142.9
857.1
1,714.2
2,571.3
3,428.4
5,142.6
6,856.8
8,571.0
$5,000
178.6
1,071.4
2,142.8
3,214.3
4,285.7
6,428.5
8,571.4
10,714.2
$10,000
357.1
2,142.6
4,285.0
6,427.8
8,570.4
1,2855.6
17,140.8
21,426.0
$20,000
714.3
4,285.7
8,571.4
12,857.0
17,142.7
25,714.1
34,285.4
42,856.8
*Based on $28 silver price

A $3,000 monthly budget needs 1,285 ounces to get through one year, or 3,857 ounces for three years.

I know these amounts probably sound like a lot. But here's the thing: if you don't save now in gold and silver, you're going to spend a whole lot more later.

What I've outlined here is exactly what gold and silver are for: to protect your purchasing power, your standard of living.

It's like having your own personal financial bomb shelter; the dollar will be blowing up all around you, but your finances are protected.

And the truth is, the amounts in the table are probably not enough. Unexpected expenses always come up. Or you may want a higher standard of living. And do you hope to leave some bullion to your heirs?

It's sobering to realize, but it deserves emphasis: if we're right about high inflation someday hitting our economy…

Most people don't own enough gold and silver.

If you think the amount of precious metals you've accumulated might be lacking, I strongly encourage you to put a plan in motion to save enough to meet your family's needs.

We have top recommended dealers in BIG GOLD, ones we've vetted that are trustworthy and have highly competitive prices. We also recommend a service that will deduct whatever amount you chose from your bank account and buy bullion for you automatically. And now, given how concerned we've been about the inflation that's coming, we've actually started our own service. You can check it all out in the current issue of BIG GOLD, risk-free. I can tell you that purchase premiums are incredibly low, due to a proprietary system that bids your order out to a network of dealers that compete for your business. We're already using it, and the response from other investors has been tremendous.

Whatever plan you adopt, my advice is to make sure you have a meaningful amount of bullion to withstand the firestorm that's almost mathematically certain to occur at this point. And now you know exactly how much gold you're going to need.


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Comments in Response

Comment by: Joseph Vanderville (#044376)
   Entered on: 2012-09-10 11:19:56

MORE KNOWLEDGE FOR ECONOMIC ILLITERATES TO GRAB --

To Brag … I was drafting my comment when I saw your fantastic post below. Apropos to your intelligent comment we can relate to … We want you and others to know that:

WE ARE REDUCING ECONOMIC ILLITERACY THE BEST WE CAN AS A FREE PUBLIC SERVICE FEATURE AT FreedomPhoenix.com ... It is an “editorial” balance we volunteer to slow down the rapid proliferation of “cursing” and “swearing” malcontent inhabitants of this otherwise interesting website – angry old-timers of FP.com who lose their cool when their writings and commentaries tilt towards the extreme Left, i.e., advocacy of violence like calling the citizenry to arms and put us all in harm’s way.

First, I want followers of Ron Paul from the “lunatic fringe” to NOTICE CAREFULLY that when Ron Paul tries to “lecture” Dr. Ben Bernanke, Chairman of the Federal Reserve in a legislative committee hearing on his ridiculous understanding of INFLATION as the Fed’s fault for printing “fiat money” [by the way the Fed does not do this … it is the Department of Treasury] the Chairman – who has a Ph.D. in Economics and recognized by U.S. satellite Economies all over the world as the “Economic Czar” of the United States today – was ROLLING his eyeballs with unbearable annoyance while listening patiently to Ron Paul!

Out of civility, Dr. Bernanke has a hard time trying to control himself from telling the Congressman that HE HAS NO IDEA at all HOW Inflation comes about, and which targeted rate of Inflation is good to the economy, and which run-away Inflation has to be avoided that would ruin the economy [Galloping Inflation], and why.

Inflation does not “destroy” the economy as Ron Paul foolishly imagined. In fact under a certain state of the economy, Inflation is DESIRABLE!

Dr. Bernanke’s discomfort comes from that simple realization that even if he will explain to Ron Paul that what the Congressman is talking about is actually NONSENSE, he considers Ron Paul “economic illiterate” and won’t understand anything Dr. Bernanke will say on the sophisticated science of Inflation and Monetary Economics where he earned his Doctorate!

That’s WHY Annonymous75 and I among others are always CALLING the ATTENTION of the American people every time Ron Paul embarrasses the public with his POLITICAL ODDITY and VOODOO ECONOMICS that are dangerous to America – and also to protect Americans from being foolishly taken for a ride!

Are we bothered by “pains in the neck” the likes of PureTrust, McEclap and company from the “lunatic fringe” whose corrosive nonsense irritates the brain every time they open their mouth, hell no, not at all! We are resigned to accept such kind of mental disability and character infirmity. What do you expect when they badmouth, it’s just natural to them … that’s how nocturnal characters from the “lunatic fringe” behave! We are not in Psychiatry who could cure mental illnesses – maybe a psychiatrist or psychologist like Suka who also makes positive comments in this website, can. For Anno75 and myself, we just do our clean-up routine every day -- throw the garbage away.

What bothers us is when those mentally disabled characters from the edge act wildly like agitated zombies whose “mental illness” infects the gullible to do such foolish things as tearing the country apart by calling to arms vigilantes with anti-Government mentality that could lead to the declaration of Martial Law all over the country! When this happens, those robotic creatures from the “lunatic fringe” will be the first to run and hide.

As of now, it is always bothersome to the entire citizenry when almost everybody is aware that the FBI Watch List is getting longer and longer every day. Fearful Americans are just sitting on the edge of their chair as they witness those disquieting events unfold before them, biting their nails with deep uneasiness and anxiety while watching their Government being attacked from all directions by those two-legged robotic leviathans from the “lunatic fringe”.

The consequential comparison of such uneasiness and trepidation is like watching the glowing crater of a red hot volcano about to explode!

BOOKMARK this “lecture” as another bonus-knowledge to economic illiterates, to get themselves educated …who knows, one day they may cease to be a disturbing liability and become useful in mending the sores of our troubled society.

Comment by: brag (#045216)
   Entered on: 2012-09-10 10:03:28

It is to the everlasting credit of JV and Anno75 that they are revealing their economic prowess, proficiency of knowledge, competence and expertise in the Science of Economics, for the benefit of all economic illiterates that had infested this website!

It is a shocking recognition on the part of economic illiterates, of their own ignorance every time learned economists like JV and Anno75 call the attention of those uneducated pseudo-economist politicians and their screwy supporters from the “lunatic fringe”, reminding them that what they have been talking about is purely Voodoo Economics!

For example, they are in a shock of their lives when ego-stung to discover and learn for the first time in their life that there is more – in fact a lot, lot more – to their weird understanding what Inflation means, a lot more to the printing of fiat money and excess liquidity as the cause of Inflation, that the falling purchasing power of the U.S. Dollar is NOT necessarily due to money in circulation but due to the shifting effect of the law of supply and demand under the Theory of Purchasing Power Parity of currencies involved -- as economist guru Anno75 explained -- and far, far away from the Federal Reserve which Ron Paul imagined as the culprit of Inflation. His economic illiterate followers join him in screaming his contempt, disparagement condemnation of the Federal Reserve in a symphony of economic ignorance. It punctures the eardrum when they kept on harping this ignorance repeatedly like a broken record … at least in this website.

Their anger towards the Fed calling for its abolition is so misdirected that those “pestering characters” from the “lunatic fringe” as JV puts it, are not just a harassing nuisance to the ears of the American public but there is something more sinister to it – they are like dangerous contaminating carriers of ignorance, some kind of a disease [mental illness] that infects the less educated tuning them into a vicious gang of juvenile delinquents that vandalize the image of law enforcement authorities and “murder” the reputation of the U.S. Federal Government in the eyes of the world.

I will not be surprise if any day Homeland Security is going to “quarantine” them to keep the public safe.

Comment by: PureTrust (#010621)
   Entered on: 2012-09-07 11:42:08

All that from a couple of self-proclaimed journalists and lawyers, who don't even know the appropriate and correct usage of brackets ([...]) in the English language!

Comment by: Anonymous75 (#045815)
   Entered on: 2012-09-07 11:27:33

Correction of the 8th paragraph of my comment below:

The effect of this parity distortion is phenomenal! At a parity exchange rate of Five US Dollars to Ten Yens, the Japanese will use their Twenty Yens to buy Ten US Dollars in the FOREX. They will use this Ten US Dollar bill to buy TWO boxes of chocolate candy IN THE UNITED STATES, no longer in Japan where their TWENTY Yens will only give them ONE box of chocolate candy. Thus DEMAND exerts pressure on the production of chocolate candy in the United States which now results in the increase of price in the United States.

"... no longer in Japan where their TWENTY Yens will only give them ONE box of chocolate candy ..." is the correct statement.

Comment by: Anonymous75 (#045815)
   Entered on: 2012-09-07 11:12:15

This is just COMPLEMENTING your “lecture” in Economics!

JV … just to add to an easier understanding of the learning “class” that you are “lecturing” in Freedom Forum, the purchasing power of income which you just brought up that does not fall even if there is INFLATION, means real income already adjusted for inflation.

I have already drafted my comment when I read yours – which is a powerful tool in educating “economic illiterates”.

Inflation and the Purchasing Power of Income are more complicated but interesting in the study of ADVANCE Economics that we discussed in graduate school. It brings us to Purchasing Power Parity Theory that we debated, and how it causes a Demand-Push Inflation.

I want to add the following example to your lecturing discourse in order to disabuse the mind of “economic illiterates” whose monolithic understanding of Inflation [single-track mind] is their assault of the “Federal Reserve printing money” that causes prices to rise hence to them, inflation!

If Five US Dollars buy a box of chocolate candy in the U.S. and Ten Yens buy exactly the same box of chocolate candy in Japan, the purchasing powers of Yen and the US Dollar in those respective amounts, in so far as purchasing one box of chocolate candy is concerned, are IN PARITY.

But in Japan, somehow the labor union caused the cost of chocolate candy production to rise so that instead of paying Ten Yens for a box of chocolate candy, it now cost Twenty Yens.

The effect of this parity distortion is phenomenal! At a parity exchange rate of Five US Dollars to Ten Yens, the Japanese will use their Twenty Yens to buy Ten US Dollars in the FOREX. They will use this Ten US Dollar bill to buy TWO boxes of chocolate candy IN THE UNITED STATES, no longer in Japan where their Ten Yens will only give them ONE box of chocolate candy. Thus DEMAND exerts pressure on the production of chocolate candy in the United States which now results in the increase of price in the United States.

Note here carefully that the price is pushed upward by Demand [from local and abroad – causing what is now called a “Demand-Pull Inflation”] – not by the Federal Reserves that economic illiterates were targeting as the culprit, and missed by a mile.

Understanding Inflation merely as too much money in circulation and blame the Fed for it is not just an exhibition of witlessness and of such ignominious ignorance – it is embarrassingly insane, to say the least!

In navigating towards the desired goals economic policy-makers want to achieve, the increase of money in circulation serves a specific purpose – to pump-prime the economy, especiall during recession. In fact more money “gives one the ability to ‘command’ others’ labor” so that in effect purchasing power is to some extent power over other people, that is, again to the extent that they are willing to trade their labor or goods for money or currency … Adam Smith.

This brings us to the issue of Price and Wage Policy, the Theory of Wage Drift, and how Labor Union increases wages that spur prices to rise – all of which cause Inflation.

You see as we go on in this economic “lecture” to make Voodoo Economists literate, the farther we move away from the printing of fiat money which in the mind of economic illiterates are the cause of Inflation.

Comment by: Joseph Vanderville (#044376)
   Entered on: 2012-09-07 10:38:11

ANOTHER FREE LECTURE ON ECONOMICS FOR THE BENEFIT OF ECONOMIC ILLITERATES…

To “fluctuate” in value means to “swing” in value either from high to low and vice versa. You don’t say that the “value” of the US Dollar “is fluctuating”, unless you are purchasing the US Dollar as a COMMODITY in the foreign exchange market.

OBVIOUSLY, those who have not studied Economics would say this crap [economic illiterates cannot distinguish], thinking that when they print their Voodoo Economics on this page, those who hardly understand how the fluctuation of the values of purchasable currencies marketed as “commodities” in the FOREX takes it course, are donkey-like impressed.

Voodoo “economists” in the asphalt jungle of Economics never have any idea that the US Dollar may either be a PURCHASING currency use to buy a particular item or COMMODITY [other currencies in the market], or as a “hard currency” the US Dollar itself becomes the item or commodity being purchased using other currencies such as the Euro or Yen and the like. In this case the US Dollar partakes the nature of a purchasable item similar to gold and silver whose “VALUES FLUCTUATE” – DEPENDING on SUPPLY and DEMAND – NOT depending on whether or not there is an increase of money in circulation.

Thus to say that the value of the “fiat dollar” is fluctuating when it is used as a purchasing power to buy commodity items in the foreign exchange market -- whose values are FLUCTUATING due to supply and demand – slaps his own face hard with such despicable ignorance .

Another FLASH POINT of KNOWLEDGE I want to impart on economic clowns who have no shame in parading their anecdotal economic illiteracy on this page is that even if there is INFLATION, the purchasing power of income DOES NOT FALL in a BOOM economy where the rate of Income rises FASTER than the rate of Inflation! [Consult other economists if you do not understand this]

Bookmark this charity of economic knowledge coming your way, and start learning something. Stop being a pestering nuisance on Economics that you knew nothing about! It is bad to the mental health of the reading public!

Comment by: Anon Patriot (#047732)
   Entered on: 2012-09-06 11:42:20

I really have to laugh, when people say:  "You can't eat gold!", as part of their argument, for why it's of no use to own gold, during an economic collapse scenario, such as happened in Weimar Germany.  I always ask such fools, whether they can eat their $1, $5, or $10 (paper) bills?  Yet, obviously, they think it important to have lots of those (paper bills).  What they fail to understand, at all, is the concept of INFLATION.  When you see the prices of everything rising - oil, gas, food, clothes, gold, silver, etc. - what is really happening ISN'T that the value of those items has increased - it's that the value of your $1, $5, and $10 bills (the purchasing power of your currency) has - DECREASED - SIGNIFICANTLY!  THAT is why instead of paying .53 cents for a gallon of gas (1975), we are now paying close to $4 a gallon (2012)!  It's NOT that the gas, itself, is more valuable, than it was 37 years ago  - no, it's that the purchasing power of your "money" (currency, $1, $5, $10, etc. bills) has DECREASED.  That is why the prices of gold and silver are rising right now.  It simply requires MORE of your currency, to acquire those same items, than it took to acquire them years ago.  The SMART PEOPLE, were the ones buying (a lot of) silver, recently, at near $26.00 an ounce!  Of course, silver is already back up to over $32.00 an ounce.  During a period of high inflation, people would be bartering (trading) their gold and silver, for survival purposes, for food, and other necessities.  Once a Weimar-style HYPERINFLATION kicked in, cash would not be accepted by anyone.  It would be totally worthless.  ONLY gold and silver would be accepted, as they have been for thousands of years, as MONEY.

Comment by: PureTrust (#010621)
   Entered on: 2012-09-06 10:59:29

The price of gold fluctuates. Sometimes an ounce of gold costs more. Sometimes it costs less. The question is, what fluctuates? the value of the dollar? or the value of gold? This can be a hard question to answer, since common people don't trade gold for much of anything, but we trade the dollar for almost everything that we buy and sell.

To help us determine which fluctuates in value more, gold or the fiat dollar, lets look at a bushel of corn. What can you do with a bushel of corn? Well, you can grind it into flour and bake corn bread out of the corn flower.

How many loaves of corn bread can you bake out of a bushel of corn flower? Whatever the number, it's almost the same from bushel to bushel.

If you use the same kind of corn in each bushel, and you grind the corn to the same coarseness for each bushel, and you use the same recipe and technique for making the bread, you will always make approximately the same number of loaves of bread per bushel. In fact, most of the variation in numbers of loaves comes from the variation in the water-weight-size of the kernels of corn before the corn is dried.

If you bake your bread from dried corn flour that is measured by WEIGHT rather than the bushel, you make approximately the same number of loaves per pound of flour every time. Why is this important? It's important because it is always the same. It never fluctuates. Same number of loaves every time.

Yet, the price of a bushel of corn can fluctuate wildly. The price of a hundred pounds of flower can fluctuate wildly. The price of a loaf of bread can fluctuate wildly. And the fluctuate always seems to increase the price over longer periods of time.

So, now you tell me, what fluctuates? the value of a bushel of corn? or the value of the fiat dollar? Having answered that question, you can easily see that it is the value of the fiat dollar that is fluctuating while the value of an ounce of gold remains almost the same.

Now, who is it that controls the value of the dollar? Who fixes loan rates? Who won't let you open a bank account without an associated number of some kind (SSN, TIN, FID)? Who is behind inflation? Who prints fiat dollars for nothing, and loans it out at face value, and then charges interest on that which really has no intrinsic and inherent value at all? Oh yeah. It's the banking system.

The price of bread was 20 cents a loaf in 1960. Has the value of a loaf of bread changed. I mean, when it costs you $2.00 for the same loaf today, can you feed 10 times as many people now as then? Can you make 10 times as many peanut butter and jelly sandwiches per loaf? No! The value of the bread has remained the same. IT IS THE VALUE OF THE FIAT DOLLAR THAT IS FLUCTUATING, AND FLUCTUATING TO THE DISADVANTAGE OF THE CONSUMER.

The price of a gallon of gasoline was 25 cents in 1960. Look at what it is now - $3 to $4 a gallon! Are there more BTUs of heat energy in a gallon of today's gasoline than there were in 1960? No! There are less, since some of it is alcohol, today, and alcohol is simply partially burned gasoline. So you see, the value of a gallon of gasoline as dropped, while the price of a gallon has risen dramatically. What has fluctuate? the value of gasoline? or the value of the fiat dollar? IT IS THE VALUE OF THE FIAT DOLLAR THAT IS FLUCTUATING, AND FLUXUATING TO THE DISADVANTAGE OF THE CONSUMER.

All the fluctuation of the fiat dollar has gone to disadvantage the consumer while it is GREATLY advantaging the banks for no reason at all! It is time we get back to using gold and silver based currency rather than the fiat dollar.

It's time we get rid of the Federal Reserve Notes, and the Federal Reserve Bank right along with them. They are destroying our buying power, and our whole economy right along with it.
 

Comment by: panocha (#045223)
   Entered on: 2012-09-06 09:10:24

I wish I have a degree in Economics. My graduate school specialization [Masters] is in a different field of study

This is a very familiar ground to JV and Anno75. I will not barge in with the kind of “Economics” I learned from the streets and embarrass myself. Unlike the ignorant among us who intrude with their "Voodoo Economics" this time I pass my comment.

JV’s and Anno75’s commentaries are not only timely but necessary, to balance those gold lies with the truth of a truckload of paper money. Keep it up.

Comment by: Anonymous75 (#045815)
   Entered on: 2012-09-06 08:36:03

THIS IS PURE NONSENSE!

This is worse than “Science Fiction”. This is pure NONSENSE! In science fiction, at least there is “Science”.

What do you get from nonsense – none, ZERO … not even a sense!

Here is the “stupidity” of this argument: The price of corn in Iowa rocketed sky high. It is suggested that you should use gold to buy corn. The conclusion was it is “cheaper”, and the accompanying statement of stupidity is that “gold continues its safe-haven role as a reliable hedge against rising inflation.”

And yet the premise of the argument is that the “price of gold constantly fluctuates”. Any metal of value that “constantly fluctuates” is NOT RELIABLE! Even donkeys understand what this uncertainty means in terms purchasing power. That being the case, does the argument make sense?

Besides, during the period of Galloping Inflation [Economists use this term to describe a disastrous Inflation], the value of gold and silver balloons sky high that instead of using a basketful of money to buy an ounce, you now need a truckload of fiat money in your hands to purchase several ounces of them.

Americans don’t have stocks of gold and silver kept in the banks. Bullions of gold stored in Fort Knox are owned by the Government. If you want to use gold to buy corn in Iowa, you have to buy it.

Then here comes the senselessness and the idiocy of it all – why not buy corn in Iowa using your truckload of money, instead of buying the same corn using gold when the price of the gold you purchased amounts to the same truckload of money?

Debts amounting to $16 trillion, CAN NEVER BE PAID IN GOLD. There are not enough gold mines in the world to produce $16 trillion worth of gold in a hundred years of prospecting and mining.

Can it be paid by FIAT money? Yes it can. Just press the button to start the printing machine and there you are – as it has always been centuries before, that is, even before you and I were born.

Besides, who would carry gold in his purse to buy milk in the grocery store in this millennium when we are now using fiat money and its equivalent to travel to the Moon and back, and fund our trillions of dollar worth of explorations of the outer universe -- unless from your home to the grocery store you carry with you a six-shooter like back in the old days.

Such is the ABSURDITY of what is reported and published here. It is all pure NONSENSE!

Comment by: Sharon Jarvis (#013429)
   Entered on: 2012-09-05 07:16:29

The average American does not have the money required to buy gold.  In addition, "paper" gold, that is a certificate instead of having the gold actually in your hand, is a ponzi scheme.  Nor can you eat gold either.  So your advice is good for the rich only.

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