The cheek of it! They raised the price of my favorite ice cream.
Actually, they didn’t increase the price; they reduced the container size.
I can now only get three servings for the same amount of money that used to give me four, so I’m buying ice cream more often.
Raising prices is one thing. I understand raw-ingredient price rises will be passed on.
But underhandedly reducing the amount they give you…that’s another thing entirely. It just doesn’t feel…honest.
You’ve noticed, I’m sure, how much gasoline is going up.
Food costs too are edging up.
My kids’ college expenses, up.
Car prices, insurance premiums, household items — a list of necessities I can’t go without. Regardless of one’s income level or how tough life might get at times, one has to keep spending money on the basics. (This includes ice cream for only some people.)
According to the government, we’re supposedly in a low-inflation environment. What happens if price inflation really takes off, reaching high levels — or worse, spirals out of control?
That’s not a rhetorical question. Have you considered how you’ll deal with rising costs? Are you sure your future income will even keep up with rising inflation?
If price inflation someday takes off — an outcome we honestly see no way around — nobody’s current standard of living can be maintained without an extremely effective plan for keeping up with inflation.
It’s not that people won’t get raises or cost of living adjustments at work, nor that they will all neglect to accumulate savings.
It’s that the value of the dollars those things are in will be losing purchasing power at increasingly rapid rates. It will take more and more currency units to buy the same amount of gas and groceries and tuition. And ice cream.
I’m not talking science fiction here.
When the consequences of runaway debt, out-of-control deficit spending, and money-printing schemes come home to roost, it’s not exactly a stretch to believe that high inflation will result.
We need a way to diffuse the impact this will have on our purchasing power. We need a strategy to protect our standard of living.
How will we accomplish this?
I suspect you know my answer, but here’s a good example. You’ve undoubtedly heard about the drought in the Midwest and how it’s impacted the corn crop. The price of corn has surged 50% in the past two months alone.
Commodity analysts say the price could rise another 20% or more as the drought continues.
Every corn-based product on the grocery shelf will soon take a lot more dimes and dollars to buy. But wait — what if I used gold to buy corn?
(Click on image to enlarge)
While the price of gold constantly fluctuates, you would have experienced, on average, no inflation over the last 30 years if you’d used gold to purchase corn. Actually, right now, it’d be on the cheap side.
When you extrapolate this to other food items — and virtually everything else you buy — it’s very liberating. Think about it: gold continues its safe-haven role as a reliable hedge against rising inflation.
I believe that those who save in gold will experience, on average, no cost increases in the things they buy and the services they use.
Their standard of living would not be impacted.
I think this kind of thinking is especially critical to adopt when you consider that supply and demand trends for gas and food dictate that prices will likely rise for a long time, and perhaps dramatically.
So how much will you need to make it through the upcoming inflation storm and come out unscathed?
Like all projections, assumptions abound. Here are mine for the following table. I’m assuming that:
To calculate how much we’ll need, I looked at two components, the first being average monthly expenses. What would we use our gold and silver for? From corn to a house payment, it could be used for any good or service. After all, virtually nothing will escape rising inflation. Here are some of my items: groceries, gas, oil changes and other car maintenance, household items, eating out, pool service, pest service, groceries and gas again, eating out again, vitamins, movie tickets, doctor appointments, haircuts, pet grooming, kids who need some cash, gifts, and groceries and gas yet again. Groceries include ice cream, in my case. How many ounces of gold would cover these monthly expenses today?
And don’t forget the big expenses — broken air conditioner, new vehicle, vacation… and I really don’t think my daughter will want to get married at the county rec hall. How many ounces of gold would I need to cover such likely events in the future?
The point here is that you’re probably going to need more ounces than you think. Look at your bank statement and assess how much you spend each month — and do it honestly.
The other part of the equation is how long we’ll need to use gold and silver to cover those expenses. The potential duration of high inflation will dictate how much physical bullion we need stashed away. This is also probably longer than you think; in Weimar Germany, high inflation lasted two years — and then hyperinflation hit and lasted another two. Four years of high inflation. That’s not kindling — that’s a wildfire roaring through your back yard.
So here’s how much gold you’ll need, depending on your monthly expenses and how long high inflation lasts.
If my monthly expenses are about $3,000/month, I need 45 ounces to cover two years of high inflation, and 90 if it lasts four years. Those already well off or who want to live like Doug Casey should use the bottom rows of the table. How much will you need?
Of course many of us own silver, too. Here’s how many ounces we’d need, if we saved in silver.
A $3,000 monthly budget needs 1,285 ounces to get through one year, or 3,857 ounces for three years.
I know these amounts probably sound like a lot. But here’s the thing: if you don’t save now in gold and silver, you’re going to spend a whole lot more later.
What I’ve outlined here is exactly what gold and silver are for: to protect your purchasing power, your standard of living.
It’s like having your own personal financial bomb shelter; the dollar will be blowing up all around you, but your finances are protected.
And the truth is, the amounts in the table are probably not enough. Unexpected expenses always come up. Or you may want a higher standard of living. And do you hope to leave some bullion to your heirs?
It’s sobering to realize, but it deserves emphasis: if we’re right about high inflation someday hitting our economy…
If you think the amount of precious metals you’ve accumulated might be lacking, I strongly encourage you to put a plan in motion to save enough to meet your family’s needs.
Whatever plan you adopt, my advice is to make sure you have a meaningful amount of bullion to withstand the firestorm that’s almost mathematically certain to occur at this point. And now you know exactly how much gold you’re going to need.
Jeff Clarkfor The Daily Reckoning
Having worked on his family's gold claims in California and Arizona, as well as a mine in a place to remain nameless, Jeff's research and writing skills are utilized in his role as editor and one of the primary writers of Casey's Gold & Resource Report.
Whether it is researching new companies to recommend, analyzing the big trend in gold, or looking for other safe and profitable ways to capitalize on the bull market, Jeff is devoted to making Casey's Gold & Resource Report the best precious metals newsletter for the prudent investor. He coordinates the efforts among the research and writing team, ensuring that whatever is happening in the gold and silver market doesn't escape coverage.
I wonder how long this inflation story telling will go on.
Taking 10% food inflation and sterilizing it with 20% housing deflation doesn’t mean there’s no inflation in the economy!
Using data like this one could make the claim Germany never experienced inflation as many items of the time were deflating.
Inflation is a nebulous concept designed to deceive the population by the ruling group.
What happens when you pay marginally more in price for say, a hot water cylinder which used to last 17 years but now only lasts 3 years! Now that’s inflation!
And clothing? How long does that last now???
You have provide all ground work for what is actually happening before our very eye’s. Inflation has hit our economy harder then we ever realised. The effect it has, is just the beginning of more to come.
ok, so, inflation is rampant and paper/electronic currency is problematic. you go to your local grocery store, fill up a basket, go to checkout, show the clerk your gold coin, and … what? you go to your gas station, walk up to the minimum wage clerk, show them your gold coin, and … what?
As the money supply increases but its velocity of circulation slows toward zero, MV declines toward zero. Prices fall, and we have deflation.
No matter how much money Bernanke prints, if people are afraid to spend it or can not spend it, or in the odd case we are observing in America now: people have no income and yet rising expenses; people get nothing from their bank except for banking fees, then in the equation MV, V=0 and MV = 0.
The odd lesson we are observing now is that at zero interest rates, MV = 0.
If I have a house, unless I live in the house, the house is a liability. In fact, even if I live in the house, the house is a liability and a head-ache……… It doesn’t matter how strong the real estate market may be, unless I can sell the house at a big profit, and quickly, the house is a liability.
The only way to profit now in the housing market is to rent-out my house, especially sub-divide my house into apartments, and rent them out. And even rental housing has risks, because the tenants can trash the property or default on the rent, or both… Meanwhile, the city raises my taxes.
MV = 0 when interest rates set by the central bank are zero.
But the beauty of this fix that the Fed ( and the other central banks are now in ) is that if interest rates are raised, MV becomes potent. So, M has to be drained from the world’s economy, and the drainage has to be done at exactly the amount to keep MV near zero…. In other words, V has to kept near zero while interest rates are raised off of zero.
The zero interest rate experiment was first tried by the Bank of Japan, and the result was the same as now in America: a deflationary economy with a mild but permanent recession.
In the Great Recession — the perma-recession — those who speculate in real estate, in stocks, in commodities, and in gold will likely “get-creamed”.
If MV = 0, then no matter how much money Bernanke prints, MV = 0.
Notice all of the money just sitting-around to-day: in bank accounts, in brokerage accounts, in home equity, and in gold? It just sits…….. And the bank is too afraid to lend it out at 2% because it can not afford to make any mistakes at a 2% lending rate because it will take the bank 36 years to replace the principle on whatever it lends at 2%.
At zero interest rates, the velocity of money decreases to zero. MV = 0.
Notice how quiet things are now at your local bank? People don’t want to borrow because their incomes are not increasing, and the bank refuses to lend unless the borrower can put-down half or more of the value of the home.
No-one can afford to make a mistake.
I walked into my local bank yesterday: they were in such a foul and frightened mood that they refused to even sign a document to witness my signature for the government, and no matter that they sat comfortably with $42,000 of my cash in a savings account earning 0% interest for me and costing the bank zero…… That’s what happens at zero interest rates.
Just because your local store and gas station won’t take gold only means they have been programmed well. No one accuses americans of being the brightest stars in the sky these days… more like a black hole sucking up all the wealth with fools gold called….. dollars.
AND if you wish to dump your gold I’ll take it at the going u.s. treasury rate.
i’ve got silver, and by the looks of these charts – not near enough. Cannot decide if paying off the house or soring silver is the best move right now. Any suggestions?
“Just because your local store and gas station won’t take gold only means they have been programmed well.”
that too. but I was thinking more of the mechanics of it. gold may be valued at thus-and-such paper dollars at any given moment, but as for it’s economic utility – anyone relying on it for any future scenario will likely find it is not nearly as useful as he’d hoped.
“Cannot decide if paying off the house or soring silver is the best move right now. Any suggestions?”
what do you expect to happen to property taxes? can you pay them? if property taxes cease, can you remain in your present environment despite the accompanying chaos?
what role do you expect silver to play in the future? are your expectations realistic? if dollars go away and silver becomes money, and considering that 99% of the population has no silver at all but lots of them have lots of guns, can you defend your little hoard?
“do not lay up for yourselves treasures on earth, where moth and rust destroy and thieves break in and steal ….”
Enjoy the emerging de-flation: not one dime coming in. No jobs. Big retirement expenses ahead, if you live so long as to retire. Zero interest income at the bank.
Instead of hydro-electic dams or coal-fired power plants; instead of atomic power plants, we have windmills and solar panels. So the lights are going out, and the hot water is becoming cold.
The electric car won’t run unless we can charge its batteries with household current— current which we can’t afford.
Mix green tech with the new zero velocity of money supply, and we have the current Great Recession: no vision, no plan, no science, no common-sense, no hope, and even bigger expenses ahead in our old age.
To replace our 2cents per kwh power from atomic energy and to replace our 3cent per kwh power from coal; to replace our 8c/kwh power from hydro-electric dams, we will soon have wind power at 42c/kwh and solar power at 50c/kwh…….. This is our future: Go plug-in your electric car.
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