Friday, June 24, 2011

Sensible actions in the face of looming inflation.... (A timely repost, perhaps)


As I write this note, I am considering a purchase... or two. Yesterday I saw a pair of Ruger P95 9mm pistols, almost as new and in their original boxes with everything along. $275 each, and I bet I can haggle that down a bit.

The thing, I don't need another 9mm or two, or even especially want them. On the other hand, what I do want and need is a solid place to store what little wealth I have. Since the current administration has cranked up the presses and begun making themselves dollars to spend at an astounding rate..... 'dollars' are not going to be the store of wealth I need. Every dollar I have in the bank today, will have some of it's value stolen away by government caused inflation tomorrow. The rate at which that value is stolen has reached roughly 13% so far.... the inflation rate conjured up using real numbers and honest accounting.... not the inflation rate our government reports today.

Today I may invest in some precious metal as a way to store wealth I have earned through my hard labor. The metals, steel and aluminum... are precious because of the value added them during manufacture. They are useful items, and things that people want now.... and will want far more in the future I suspect.

Folks, as I post this... the US national debt has exceeded $14,000,000,000,000 and is racing upwards. Our debt has actually surpassed our gross domestic product, and there is no end in sight to congress's spending. I see no other conclusion than hard times ahead... possibly very hard times... and thought it might be timely to re-post what follows.....

Hard times and good times, people look for ways to save wealth. I'd like to say 'save money', but too often money (cash) is only an illusion of wealth. During times of inflation a savings account earning a few percent interest can result in a loss of capital. Saving 'money' can mean losing money.

But... you may say... how can earning interest on money in the bank mean we are actually losing money? It works like this.... We deposit money in the bank. In our case, dollars. On the day we deposit that money, we might be able to buy a gallo
n of milk for $3.00. We begin earning interest on that money on the day we deposit it, and lets be generous and say it's 5%. In a year, even with compound interest, we are only going to have about $3.15. If, in that same year, inflation has driven the price of milk to $3.50 a gallon, we have lost about 10% to the inflation factor, even while our 'money' earns interest in a savings account.

Money (or cash) is not wealth, it's just a representation of wealth, and sub
ject to manipulation and the effect of economic factors. The milk.... it's a gallon of milk. It's not a good long term repository of wealth, but at least you know where you stand with it. The same can't be said by so many folks who had their wealth 'invested' in 401k plans, and have seen their wealth diminish by 50% since the One took office.

It can be worse... inflation can turn rampant, and many a nation has been brought to its economic knees by triple digit inflation. In every case, heavy debts and overheated printing presses turned that countries cash to toilet paper, and sometimes did so overnight. Cash, especially the American dollar, has long been thought to be a nearly perfect play on security. After all, cash is cash! The problems begin when the government that backs that cash becomes unstable, or loses the trust of those they deal with and govern.

Some people store wealth in valuable metals, such as gold and silver. Since
history was first recorded, these have been regarded as stable investments and wise ways to sock away the egg money. While stocks and nations can and do fluctuate, gold retains value, as does silver. I suppose, if one had a large amount of wealth to tuck away, buying gold and silver might make sense.

The problem with precious metals is not buying them, nor in storing them... not really. It's in spending them. During good times, turning them to cash means dealing with a broker who takes a cut. Sometimes a ruinous cut. During bad times, when cash has lost much of it's value, finding people who will trade goods and services for precious metals can be tough. Not many people anymore know what an ounce of silver is worth, nor do they really care to trade their labor for a lump of metal. Likewise, buying a truckload of produce with an ounce of gold can b
e difficult.

There are, however, other forms of metal not so precious just now. Not silver, but aluminum. Not gold, but steel. Not platinum, but copper and brass. All these cheaper metals turn into their own kind of precious when worked into firearms and ammunition. In these value is stable in ways that gold lovers only wish their store house of wealth was.

As an example, allow me to present a decision I made today....

In this pay period I had a few hundred dollars not already aimed at bills. No deb
t pressing at the moment, I still understand the future must be looked after and spare money should not be simply blown away in a moments folly. I am not one for shopping sprees, buying crap useful for nothing but sucking up floor space and emptying checking accounts.

Ordinarily, that money would be click/dragged over to a savings account and tucked away as ones and zeros on the bank balance. Maybe at a measly few percent interest, but saved none the less. But... with quite literally trillions of new dollars being pumped into our flagging economy recently, inflation is beginning to rear its ugly head. Is a savings account based on 'dollars' the best way to store wealth just now?

I had an opportunity to buy a different kind of precious metal as an investment, and it made sense to do so. That same $200 which might have been dribbled into the savings account, instead bought me a Ruger p85 9mm with two magazines. Knowing they have recently sold for much more than that on, my investment earned a return the second I took possession. Not one or two percent, but nearly fifty percent.... immediately.

While the p85 is not a firearm I ever really desired owning, that doesn't effect it's value as a store place for wealth. Knowing it's not gold nor silver, it does have something better than both those metals... it's useful. I can use it, over and over again, and it's value won't go down while I do. Better than that, it's easily recognized wealth that's commonly desired, most especially when times go bad. The farmer that might not care to trade a side of beef for my ounce of gold, is far more likely to willingly make that swap with the Ruger as his price.

In good times.... even the best of times.... firearms retain value better than any bank account, and better than most other store places of wealth. As an investment, looking for return, firearms bought used at good prices almost invariably outperform the stock market, hands down.

Ammunition, bought inexpensively, can serve just the same. A case of Chinese 7.62x39 I once bought on sale was later traded (unopened) for a rifle worth five times what I paid for the ammunition. 8x57 Mauser I paid $2 a box for by the case lot, sold a year later for twice that.... and all parties were very happy with the deal.

As a way to squirrel away wealth.... firearms and ammunition are hard to beat. In good times or bad, quality used firearms bought at the right price will always be a solid store house of wealth, and a good investment. When I look at this Ruger, I don't see a new shooty toy, but instead I see $200 turning into $300 overnight, and next year maybe into $400, and the year after... maybe a side of beef.

Priorities my friends..... priorities.
  • Have a nest egg in case of job loss
  • Have on hand what you need to live, should it be hard to come by
  • Pay off debts
  • Protect what wealth you have, in the best ways possible

1 comment:

Bryn, North Wales, UK said...

Slightly different purchasing pattern here, but with the same intent - turn cash into tangible goods before it becomes worthless.
Our target here is to have a maximum of three months worth of bill payments in the bank at any given time, plus a £700 (US$1000 ?) reserve - this may yet prove too be too much.
All other cash is converted primarily into tinned & dried foodstuffs for long term storage.
Not too much frozen food - no good if you don't have electricity.....
Defensive weaponry investment is more medieval thanks to our gun control laws - we have swords, spears, crossbows, a longbow, knives etc. We also have an open fireplace, a cauldron, & 2 hungry dogs..... Don't laugh too hard - it could happen to you in the US unless the Obamination & his croneys are voted out next year.
Here endeth my two shillings worth......!