Last Friday the stock market experienced a sea change. Perhaps even a game changer. Gold suddenly skyrocketed $66 (about 3.5%), and gold stocks went up almost 7% in one day. You can look at this in one of two ways. Either the value of gold went up, or the value of the dollar went down.
The truth is probably somewhere in between, leaning heavily towards the dollar losing value. Gold and silver generally don’t gain or lose value so rapidly with such volatility. After all, it’s not silver and gold that is being magically produced by a Federal Reserve computer. The increase in the stock of gold and silver is rather slow. Watch this ingenious video and you’ll see that the cost of almost everything has pretty much stayed constant since the 1960’s in terms of silver and gold.
Except, of course, for education, which has been so grossly inflated because of government loans that even in terms of silver the price has skyrocketed.
This tells you several things. First, a silver dime or silver quarter from 1964 or earlier (all dimes and quarters were made of 90% silver before 1965) can buy the same thing today that it could buy in 1964. Second, if you had saved all your money in silver dimes and quarters, then you’d have the same purchasing power today that you would have had in 1964. If you had saved in pieces of paper called dollars, you would be able to buy very very little.
Here’s more: The price of gasoline has actually gone down since 1964, not up. If you want to see that in practical terms, then take 10 dimes from 1964 or older. That’s one lousy dollar in legal tender, and go fill up your tank. One dime will buy you a gallon of gasoline. One dollar in silver dimes will buy you 10.
Owning dollars is opening yourself up to government theft, because the government can just print them. Imagine if there was a magical elf that could simply conjure silver out of thin air. Don’t you think the price of silver would go down? Sure it would. You wouldn’t want to own it anymore. Well, there is a magical elf that can conjure up dollars out of thin air. It’s called the Federal Reserve. So why would you ever want to own dollars? After all, they grow on trees.