Silver Quarter still buys a gallon of gas!

(Comments here are meant for physical posession purposes)

In 1964 a "silver" quarter purchased a gallon of gas. There are other benchmarks one can also cite.

Over time, silver has pretty much kept up with the current economy. Gas in my area is under $3.25 a gallon, essentially the value of silver contained in the same 1964 quarter.

The Dollar Index has jumped recently from 78 area to almost 85, today a huge jump closing in on 87. The dollar is showing global strength, prices of key commodities are all in line with each other. Gas prices have dropped. I'd love to see gas at $2 a gallon and all of my other costs drop back in half, even if that means silver will drop as it should.

Silver has NOT lost value, it has maintained it. Measure your PM's in quantity and compare their buying power properly.

 

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Compared to other investments, It's not a good sign that after 50 years silver breaks even.

 

I do not consider something that cost 25 cents in 1964 being worth $3 today breaking even.

The point of my post though is that silver is not dropping, it is maintaining econimic value.

 

Heck, the first time I ever bought gas (1969) it was at Hess, for 14.9 cents per gallon.

I went nuts the next week, they raised it by 2 cents.

[heck, that was about a 15% increase]

$2 was a lot of gas!

 

My bad.

 

A silver coin doesn't pay dividends so the only way it can provide a return on investment is by growing in value. The fact that a 1964 quarter still buys a gallon of gas means the purchasing power of that quarter has grown from $0.25 to $3.25 in 50 years, but the "intrinsic" value has remained the same. You haven't lost money, in theory. (Can't say the same for a 1965 quarter of course. )

A quarter from 1964 that had been invested and attained an annual average 7% return would have basically doubled every ten years, resulting in a value of around $7.88 in 2014.

And of course a paper dollar from 1964, which could have purchased 4 gallons of gas, today can purchase about 1/3 of a gallon. It's purchasing power eroded significantly. So if your choices were to keep silver coins versus keeping paper money, clearly silver won. But if you invested either amount, you would have been better off.

That hasn't keep me from buying silver... it's so pretty...

 

I put $4K into a no-brainer, no-effort mutual fund in the early 1980s. With that money, I could've bought 3200 gallons of gas, or about 570 ounces of silver.

By 1990, the money had probably grown to $7K or so (I don't have the records on hand). At that point, that would've bought 6000 gallons of gas, or 1200 ounces of silver.

Today, that money has grown to $46K. That would buy 15000 gallons of gas, or 2740 ounces of silver.

Sure, silver and gold prices tend to keep pace with the prices of other things, and the purchasing price of a dollar tends to decrease over time. But socking all your money into metals instead of something that actually earns a return? Not wise.

 

All you hoarders and investors should FORGET the PM ups and downs of the past century. We now have an unprecedented situation, NEVER seen before, of debts in the trillions and nominal derivatives equal to 20 times the world's annual GDP. The PM's are the only MONEY with no counterparty risk.

The present explosion of the money supply will not end well. All you scoffers whose assets are totally denominated in dollars (like housing, savings, insurance policies, etc.) are going to learn some hard lessons before this is over.

 

What makes you such an expert?

 

What makes you so rude?

 

Posting before the lock.

 

That was when Beatlemania was running wild in the U.S.

 

Housing is "denominated in dollars"? How odd. I usually see it denominated in square feet.

Or will The Coming Hyper-Inflation Apocalypse suddenly cause my house to collapse down to a Gilligan's Island-style grass hut?

 

The PRICE of housing is denominated in dollars. Do you tell your Realtor that you want to buy a 1650sf house and don't care about the price?

By the way, the recession of 2007-2009 savaged the middle class, cutting the average household's net worth* by more than a third, most of that attributed to a reduction in the value (in dollars) of their homes.

Hundreds of thousands of homeowners are still under water, owing more than their home will bring in today's marketplace, although prices are improving, more for new homes than existing homes; this has nothing to do with PM's, it resulted from a housing bubble fueled by easy money, low mortgage interest rates, and unqualified buyers, followed by unexpectedly reduced incomes and bankruptcies.

PM's wouldn't have saved you, but it does point out the risks of having all your assets in dollars.

*L. A. Times, June 2012
"WASHINGTON — The typical American family lost nearly 40% of its wealth from 2007 to 2010 as the Great Recession reduced household net worth to a level not seen since the early 1990s.

The net worth of the median U.S. family — one with an equal number of families richer and poorer — fell to $77,300 in 2010 from $126,400 three years earlier, after adjusting for inflation, the Federal Reserve said in a new report Monday.

The drop, much steeper than previous Fed quarterly reports have suggested, underscores the severity of the 2007-09 recession that decimated the housing market and resulted in massive layoffs that slashed people's incomes.

Although families have recovered some of the lost wealth in the last 18 months, the new 80-page Fed report shows that the financial shock hit them across the board — rich and poor, young and old, the well-educated and the less educated and those with and without children. The report also detailed incomes, debts and various assets owned by families."

 

"The PM's are the only MONEY with no counterparty risk."

They are not valued as money except the USD$ value stamped on US Bullion where 1 oz silver is $1.00. Yes, that value of $1.00 could have a counterparty risk as it is promised 1 USD if delivered. Bullion not valued in a currency has no counterparty risk simply because there is no counter party guarantee of exchange value. The issuer is under no contractual responsibility to make good on it in any currency or value as it has none tied by contract to them. Why would having bullion with no counterparty risk being a good thing? It has no relationship. Yes, it is a popular slogan on many websites but that doesn't make it factual.

http://financial-dictionary.thefreedictionary.com/Counterparty Risk

 

Gas is $4.83 here. Unless silver goes back to $40 or $50 an oz, I'll be stuck using non bullion forms of pay.

 

Agreed with Doug. Normally I wouldn't touch PMs even with a 12ft pole (I'm young so it's not like I had an opportunity to buy PMs in different circumstances). The only reason I'm buying is because I also think this time is different.

When interest rates start to rise, government spending will rise with it (cost to service debt) and with that, there will be a rise in taxes. The govt will not keep rates high enough to fight inflation effectively, otherwise they will have to default on their debt. This will cause a rise in PM prices. Also, rising PM prices will get more people interested in buying physical (with the hopes of preserving wealth, capital appreciation and tax dodging). We will see much higher prices within the next 20 years.

At least, that's what I think. If it happens, great! If not, my other assets should make up for losses in my PM holdings.

 

It's far from unprecedented. Similar events happened in Asia a few times from 1200-1870. I'm sure they happened in Europe in the past, as well. The difference is that it's no longer legal to throw the debtors into prison (at least not in the US), so the "stick" to force repayment isn't as harsh.

 

BTW, the OP's argument is flawed in that it's essentially comparing the relative value of commodities. Three years ago, someone may have made a claim that "a dime would buy a loaf of bread in 1964 and it still buys a loaf of bread (in 2011)." In the last three years, the cost of a loaf of bread is about the same as it was in 2011, maybe slightly lower due to a 20% drop in the component price of wheat, but it now takes three 1964 dimes to buy a loaf of bread. Three years ago, a gallon of gas was $3.40, and today it's $3.22. Three years ago, silver was twice the price it is today, so the proverbial 1964 quarter would have bought TWO gallons of gasoline... if you pushed back to 3.5 years ago, it would have bought THREE gallons of gasoline.

If you assume silver to be the perfect hedge against inflation, you'd think we had 100-200% inflation since 2011.

This is why the "basket of goods" approach is used for defining inflation instead of single products/commodities. With food, you can play the "a coin of silver bought X" game all day.

For example:

In 1913, a silver dime bought a little less than two pounds of bread, a quarter and dime bought a little less than a gallon of milk. In other words: For a dime and a quarter you could buy a gallon of milk or seven pounds of bread.

In 2013, a silver dime bought a little less than a pound of bread, and a quarter and a dime bought a little more than a gallon and quart of milk. In other words: For a dime and a quarter, you could buy 1.25 gallons of milk or 3.5 pounds of bread.

Again, the validity of the phrase is based upon a snapshot of time. It's generally flawed outside of that single snapshot. Yes, PMs, over the extremely long run, on average, will keep pace with inflation, but there will always be times when they're under-/over-priced. They tend, on average to retain value relative to fixed dollars, because we DEFINE them that way.

 

For those of us who were able to hold onto our houses through the "Great Recession", the temporary loss to our wealth was only on paper. Many of us were able to refinance to historical lows and are now much better off than we were going into the recession.

I don't understand how owning a house translates to "having all your assets in dollars". I thought owning a house means you have some of your assets in real estate. Much like if the price of silver plummeted 30% (as it has in recent years) you wouldn't say that is one risk with "having all your assets in dollars".