Post by jeffolie on Oct 19, 2012 17:28:48 GMT -6
QE3 creates Gold desire: gas cost 10x more view
The below interesting and well written piece compares the long term costs of gas for a couple of tank fulls and concludes that QE3 makes Gold a good buy. This kind of simple view has merit and may reach down to the consumer someday. The real world has the consumer buying gold in India and China but not in America yet. Most likely Americans do not hoard assets [including gold] because they barely have any savings to buy assets [40% do not have $500 in savings]. But for those with houses, the wealth effect of the recent rise in house prices does not impact their savings accounts leaving the Type 1 investor to buy assets ... these upper 20% of incomes/wealth buy stocks and bonds not metals yet. America is not India nor China yet. Maybe by 2016 America will fear being India or China.
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October 18, 2012
QE3 Makes Gold An Attractive Investment.
Ever wonder why a country buys gold? If you’re a deadbeat country, you might need it for international trade. Of course, if you are printing money like crazy, buy gold now at x dollars and sell it a few years down the pike at 3x dollars. As a Government, you know what you’re doing even if the rest of the world doesn’t. Of course if you’re a country running a tight ship, buying gold could be a way of tightening up the money supply. Not too many countries are in that boat.
Normally holding physical gold for the average investor, was a losing proposition because, gold pays no interest. Well, with 8% inflation and 1% interest rates, gold is a better deal than a printed dollar. Plus if interest rates stay low like this, you’re at least making the difference between the current inflation rate and interest rates.
There is one problem, if everyone starts reaching for gold, the price will climb. The problem is the government needs to stop that from happening. They will again have to outlaw gold possession.
When I was in college in the 1960’s a ten dollar bill bought two full tanks of gas and you had a couple of dollars left over. Today a hundred dollar bill will buy two tanks of gas—maybe. The peculiar thing this time around, is that the hundred dollar bill is our biggest bill in circulation.
To the young people just entering the work force, today’s prices are the only ones they have ever seen. Everything appears normal to them. However if you had put 10 hard dollars earned in 1965 into a savings account, you don’t have the same buying power today that that ten dollars had 60 years ago. Of course the price of gold was 35 dollars in 1964.
With interest rate at 1%, bonds use to be the retirement vehicle for most retirees. Why even bother with them? Convert your savings to gold or put your dollars in a safety deposit box and apply for Supplemental Social Security (if you have no funds in the bank, you qualify).
As long as our government wants to spend a trillion dollars more than they take in in taxes, your savings are being taxed by inflation. Gold and silver have maintained their value over the ages. They are a store of value that pays no interest. If Bernanke thinks that keeping interest rates low is good for the economy, let’s all buy gold and silver. Let him covet his paper dollars, while we laugh at him.
They’ll have to start printing Thousand dollar bills pretty soon,--but doesn’t that pretty much give away what is actually going on? Of course not! If you have been poor all your life and now have a $1,000 dollar bill in your hand, you have made it! You are rich! You’ll earn 5 times more than what your dad did and you’ll be proud. Even though your pay raise each year is just the cost of inflation, it is a pay raise, as far as the average worker is concerned.
Then we have Ben Bernanke saying he will buy all housing paper (40 billion a month) (because the banks aren’t dumb enough to buy it) for two years, kind of blows me away. These people in office are going to save us, but I kind of wonder what they are trying to save us from?
I just wish I had bought gold at $35!
greatdepression2006.blogspot.com/
The below interesting and well written piece compares the long term costs of gas for a couple of tank fulls and concludes that QE3 makes Gold a good buy. This kind of simple view has merit and may reach down to the consumer someday. The real world has the consumer buying gold in India and China but not in America yet. Most likely Americans do not hoard assets [including gold] because they barely have any savings to buy assets [40% do not have $500 in savings]. But for those with houses, the wealth effect of the recent rise in house prices does not impact their savings accounts leaving the Type 1 investor to buy assets ... these upper 20% of incomes/wealth buy stocks and bonds not metals yet. America is not India nor China yet. Maybe by 2016 America will fear being India or China.
======================
October 18, 2012
QE3 Makes Gold An Attractive Investment.
Ever wonder why a country buys gold? If you’re a deadbeat country, you might need it for international trade. Of course, if you are printing money like crazy, buy gold now at x dollars and sell it a few years down the pike at 3x dollars. As a Government, you know what you’re doing even if the rest of the world doesn’t. Of course if you’re a country running a tight ship, buying gold could be a way of tightening up the money supply. Not too many countries are in that boat.
Normally holding physical gold for the average investor, was a losing proposition because, gold pays no interest. Well, with 8% inflation and 1% interest rates, gold is a better deal than a printed dollar. Plus if interest rates stay low like this, you’re at least making the difference between the current inflation rate and interest rates.
There is one problem, if everyone starts reaching for gold, the price will climb. The problem is the government needs to stop that from happening. They will again have to outlaw gold possession.
When I was in college in the 1960’s a ten dollar bill bought two full tanks of gas and you had a couple of dollars left over. Today a hundred dollar bill will buy two tanks of gas—maybe. The peculiar thing this time around, is that the hundred dollar bill is our biggest bill in circulation.
To the young people just entering the work force, today’s prices are the only ones they have ever seen. Everything appears normal to them. However if you had put 10 hard dollars earned in 1965 into a savings account, you don’t have the same buying power today that that ten dollars had 60 years ago. Of course the price of gold was 35 dollars in 1964.
With interest rate at 1%, bonds use to be the retirement vehicle for most retirees. Why even bother with them? Convert your savings to gold or put your dollars in a safety deposit box and apply for Supplemental Social Security (if you have no funds in the bank, you qualify).
As long as our government wants to spend a trillion dollars more than they take in in taxes, your savings are being taxed by inflation. Gold and silver have maintained their value over the ages. They are a store of value that pays no interest. If Bernanke thinks that keeping interest rates low is good for the economy, let’s all buy gold and silver. Let him covet his paper dollars, while we laugh at him.
They’ll have to start printing Thousand dollar bills pretty soon,--but doesn’t that pretty much give away what is actually going on? Of course not! If you have been poor all your life and now have a $1,000 dollar bill in your hand, you have made it! You are rich! You’ll earn 5 times more than what your dad did and you’ll be proud. Even though your pay raise each year is just the cost of inflation, it is a pay raise, as far as the average worker is concerned.
Then we have Ben Bernanke saying he will buy all housing paper (40 billion a month) (because the banks aren’t dumb enough to buy it) for two years, kind of blows me away. These people in office are going to save us, but I kind of wonder what they are trying to save us from?
I just wish I had bought gold at $35!
greatdepression2006.blogspot.com/