Author Topic: Precious Metals Will Benefit From US Dollar Being wiped out.  (Read 3758 times)

Offline Silver surfer

  • Prepper
  • **
  • Posts: 40
  • Karma: 3
  • Never underestimate the speed and power of stupid
This article paints a very unpleasant picture of the upcoming future. The source of this article was Kitco.com and they seem to be a very factual and level headed news source and not one of those doom and gloom,end of the world news sites.

http://www.prlog.org/11536430-silver-gold-unrecognized-gains-precious-metals-will-benefit-from-us-dollar-being-wiped-out.html

Offline fred.greek

  • Survivalist Mentor
  • *****
  • Posts: 768
  • Karma: 41
Re: Precious Metals Will Benefit From US Dollar Being wiped out.
« Reply #1 on: June 11, 2011, 10:10:21 PM »
Disagree:  Gold, silver, etc., will in the long-term hold the same value relative to essentials as they have in the long-term.  Gains or losses against the dollar, or any other fiat currency, are an illusion.

Offline Malamute

  • Senior Survivalist
  • ****
  • Posts: 250
  • Karma: 18
  • Lester Burnham goes Survivalist
Re: Precious Metals Will Benefit From US Dollar Being wiped out.
« Reply #2 on: June 12, 2011, 12:01:54 AM »
Disagree:  Gold, silver, etc., will in the long-term hold the same value relative to essentials as they have in the long-term.  Gains or losses against the dollar, or any other fiat currency, are an illusion.
This begs an important question:  what is "the same value relative to essentials" for gold, silver, et. al.--in other words, do gold and silver really hold up in terms of buying power over the long term? 

Well, if you look at sources for menu/store prices from 19th century and pre-Federal Reserve US, what you'll find is that the old adage that "An ounce of gold buys a good suit" holds true...check out this 1897 Sear's catalog: 
http://www.lopsica.com/incanus/sears.html
you'll find that the suits ranged from $2.98 to $22.00--so the highest-price suits (in sears catalog) cost $22/.9675 ounces (the amount of gold in the st gaudens $20 double eagle coins was 0.9675 ounces), so gold had a dollar purchasing power of  $20.67 per ounce,  and a good suit cost about $22 back then, so gold's purchasing power in terms of "good suit price" back then was $22/$20.67 = 1.06 ounces, which when indexed to June 11 2011 spot price is:  $1532.10/oz x 1.06 oz = $1624...now let's look at a 2011 store price for a Giorgio Armani Men's Model Suit:
http://www.saksfifthavenue.com/main/ProductDetail.jsp?PRODUCT%3C%3Eprd_id=845524446227590&afsrc=1&site_refer=GGLBASE001&ci_src=14110944&ci_sku=ParentItem0461413587388
...retail price at Saks is currently $1895, so gold is holding up rather well in terms of buying power.
 
If you look at the old prices in light of the adage that "An ounce of silver buys you an upscale steak dinner,"  then the story is a little different:  A Morgan dollar (0.77 ounces silver) had a face value of $1.00, so silver back in the 19th century had an effective value $1.00/0.77 ounces, equalling $1.29 per ounce...a steak dinner at an upscale restaurant in pre-Federal Reserve era --here's a 1912 Ritz Carlton Menu; 
http://209.203.176.27/search/tCIA+digital+collections+%3B+pre-1923+menus%2C+0107/tcia+digital+collections+pre+1923+menus+0107/-3%2C-1%2C0%2CZ/l962~1051399&FF=tcia+digital+collections+pre+1923+menus+0107&330%2C%2C498%2C0%2C0
...which is showing a price of $1.00 for the sirloin steak dinner--so the equivalent of 1.00/1.29 = 0.775 ounces of silver.  Today's Crimex spot price is $36.20;  $36.20(0.775) = $28.05...but Smith and Wollensky's 2011 steak dinner entries run at about $50 a pop, so silver (if we use steak dinners as a reference point) Crimex spot prices lag lag behind a bit.  But this is not surprising considering the extent to which Crimex/manipulates silver prices.

« Last Edit: June 12, 2011, 12:07:35 AM by Malamute »

Offline tamo42

  • Survivalist Mentor
  • *****
  • Posts: 527
  • Karma: 23
    • The Primal Prepper
Re: Precious Metals Will Benefit From US Dollar Being wiped out.
« Reply #3 on: June 17, 2011, 12:50:57 PM »
I think a better explanation for the discrepancy between the steak dinner and the price of silver is simply that the value of precious metals, like the value of anything, does change over time.

The primary advantage of gold and silver is that they are relatively difficult to increase in supply, so that change is very slow. But look at a chart of gold/oil or any other commodity versus gold or silver and you will see that the purchasing power of gold and silver and not anywhere near constant. They are however, relatively more constant than compared to fiat currencies.

Offline Nomad, 2nd

  • Survivor
  • ***
  • Posts: 157
  • Karma: 3
  • New TSP Forum member
Re: Precious Metals Will Benefit From US Dollar Being wiped out.
« Reply #4 on: June 17, 2011, 06:26:57 PM »
I think a better explanation for the discrepancy between the steak dinner and the price of silver is simply that the value of precious metals, like the value of anything, does change over time.

The primary advantage of gold and silver is that they are relatively difficult to increase in supply, so that change is very slow. But look at a chart of gold/oil or any other commodity versus gold or silver and you will see that the purchasing power of gold and silver and not anywhere near constant. They are however, relatively more constant than compared to fiat currencies.

More accurate would be that the VALUE of the PM's remains constant, but that the Value of the FRN has it's ups and downs (We are in the incorrect mindset that Gold is valued in Dollars, rather than the other way around. )

Also, notice that the 'Traditional' ratio of gold: silver is OFF.

Silver (Not that I'm buying, I stopped buying at $12.88) is undervalued.

Offline tamo42

  • Survivalist Mentor
  • *****
  • Posts: 527
  • Karma: 23
    • The Primal Prepper
Re: Precious Metals Will Benefit From US Dollar Being wiped out.
« Reply #5 on: June 17, 2011, 06:35:39 PM »
I don't mean value of precious metals in terms of dollars, I mean value in the economic sense.

To get a little technical, the marginal value of any good is determined by the intersection of the subjective marginal utility for the lowest seller and the subjective marginal utility for the highest buyer. Where these two things overlap, trade occurs. It doesn't matter what the good is, whether it is gold, silver, dollars, tables, fishing guide services, or meatballs - supply and demand (subjective marginal value thereof) determines the exchange.

Gold and silver emerged as money in many societies around the world because they were readily marketable and the people who used them as intermediaries of exchange were confident that they would be able to use them again in the future to trade for something they wanted more. This is the fundamental quality of money. That does not mean, however, that supply and demand don't change for gold and silver. It just turns out that they change more slowly.