May102011
Savers are Losers!
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PDFGuest post by Chris Slife, President of Howling Coyote Silver Company
This article is a rebuttal to, Buying gold — is it better than saving?
Savers are Losers!
For most of us, saving usually means setting money aside each month into a savings account. The assumption has been that this is the ‘safest’ way to save. I want to challenge this assumption and encourage people to look at other ways to save.
Fundamentally, I agree with the need to consume less, spend less and set aside for the future; however, whatever savings vehicle you choose, it MUST be able to hold its value over time, i.e. retain its purchasing power. For those that choose to adhere to the traditional wisdom of holding all of your savings in the dollar, i.e. savings accounts, money markets, or certificates of deposit, there is a very real risk of their purchasing power diminishing over time. In other words, because of the loss of purchasing power, you will become a loser – of purchasing power that is.
Chart #1 is a 20 year chart of the dollar:
Chart #1
Chart #2 is a longer term chart beginning with the creation of the Fed back in 1913:
Chart #2
If the majority of one’s savings had been kept in dollars over this time period, they have become a loser – a loser of purchasing power. This loss in purchasing power is accelerating. As you can see from Chart #3, we are creating dollars at a faster and faster rate.
Chart #3
The more dollars that are created, the less valuable every dollar already in existence becomes. Should this acceleration continue, or move into a hyperinflationary type event, traditional savers will be harmed even more. It is crucial that you choose at least one savings vehicle that accounts for purchasing power.
Below, I will share with you how I save. (And by the way, saving is NOT investing. Saving is preservation of purchasing power not trying to increase it.)
Step One
1) Emergency cash on hand in case you can’t get to a bank or banks close in an emergency
2) Have a savings account that has enough in it to cover up to a three month’s worth of expenses
Step Two
1) Gold and silver bullion
2) Food
3) Means of protection
4) Other common tangibles that would not be available during a hyperinflationary event
To sum up, I think it is very important for everyone to save for the future. The important caveat to remember, however, is that one of your saving vehicles must retain its purchasing power.
DISCLAIMER: I am not a paid financial consultant. I do not share in your GAINS or LOSSES so invest in your own financial education and study, study, study. Do not take my word for anything. Simply use it as a springboard to further educate yourself.
© 2011, thesurvivalmom. All rights reserved.
(10) Readers Comments
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Jesse
I agree with you on the concept that NO currency in the world has intrinsic value. Which by the way is the vary reason countries use currency instead of money, because it makes it easier to expand the availability of it when 'needed' by the respective governments…
But I would like to know why you place a higher value on gold and silver bullion than you do on other things? You can't eat gold, and it won't protect itself. I personally think weapons and stores of food are a higher priority until you have a good safety margin established. Then, purchase items that others may want in the future. Because when push comes to shove I'm sure I could barter food stores or ammo for items I need much easier than I can gold or silver. I also think an un-appreciated resource is arable land. The wealth of kings used to be land because that is how they produced food and other goods. Which if we are not careful (as a planet) will likely become the measure of wealth again when the food supply fails to sustain the population…
TheSurvivalMom
I've talked with Chris many times, and he doesn't downplay food storage at all. I believe he lists food as one of his own personal goals at the bottom of the article. Silver and gold will be useful to purchase goods you don't have and pay for important services. Both are important to preparedness.
Chris
Hi Jesse, I actually agree with you 99%. From a financial perspective, at least for me, gold and silver have, and I am guessing will, continue to save my purchasing power. Per my post, see above, I agree that food, water, protection, tangibles, et cetera, are ALL very important as well. Again, I also love your idea of land. I live in the Pacific Northwest and am looking, with several other families, for a piece of property that will be for both vacation and a place to go in a worst case scenario.
Chris
Our 1% of disagreement is really probably only a matter of timing. Until / if the system collapses, gold and silver are a 'savers' best FINANCIAL protection of purchasing power right here, right now. To your point, however, I agree that for PERSONAL protection, food, water, firearms / ammo, and other tangibles are what people should be buying, in addition to the metals. I know that my own food purchases have gone up in value quite a bit in the last couple of years. I only say that to say that it would be much more expensive now if I had to buy my current food supply with today's dollar.
Anyway, I appreciate your reply and agree with you for the most part.
Today'sSurvivalShow
Lisa, I would like to mention that when it comes to purchasing power, I can't think of anything more important than a 3 month emergency fund, being first and foremost. I actually prefer 6 months. Consider this, most emergencies are less than $2,000. However, most Americans have to go into debt to pay for that if a financial emergency hits. Now that's a huge loss of purchasing power, to the tune of high interest credit! Never mind about food, water, gold, silver or whatever, granted those are important, but not as important as reducing one's propensity to incur debt! Thanks for this post on your blog, because it needs to be brought up front into prepper's minds.
Lace
My parents bought into the silver "rush" of the late 70's. They also went through the silver crash of 1980. Never again would my mother put money into something so intangible of the value of precious metals.
My thoughts on having gold and silver are more in tune with Jesse. I can't eat it and I have to defend it. Never mind the difficulty in finding someone to barter with who would accept gold as opposed to wheat in a starvation situation. In what I perceive to see a slow dying of our civilization and economy the fact remains that I probably won't be able to pay my mortgage or water bill, buy gas or even groceries with gold or silver. Sure, in a Mad Max world there might be some bargaining with gold but unless total collapse is what we think is going to happen it seems like gold and silver aren't really any safer.
Final thoughts, all I hear about is buying gold on tv commercials, blogs and on the news. It's not as thought the price will always continue to rise and I suspect we are nearing the top for the price of gold. Anyone remember the housing bubble? Oil bubble? Stock market bubble? Nothing is a sure thing and certainly this kind of hyper speculation about the price of gold continuing to rise sure seems like a good indicator that we may well be looking at a gold bubble.
updawazoo
gold is to preserve and increase wealth. silver is to preserve and increase purchasing power. the only bubble is the dollar. when my ignorant friends, family, barber, homeless people and my dog start talking about how gold and silver are good investment, then maybe it's a bubble. other than that, it's an insurance policy against the dollar bubble.
wyzyrdap
Way back in the pre-dotcom-crash days, I bought quite a bit of silver from a coworker who was a weekend metals-speculator. I sold it when things got bad, for approximately what I paid, and considered it a good investment at the time.
He DID give me what I still consider good advice if you decide to invest in metals for trade. "Maybe quarters, mostly dimes, a few silver dollars, if you feel like it…. If TSHTF, nobody is going to make change. You want a loaf of bread and have a silver dime, it costs a silver dime. You have a Krugerrand, guess what that bread is going to cost you.."
MasterPo
You need cash. Life comes at you FAST and HARD, especially when you least expect it. "Savings" will never get you ahead even in relatively good times (and with relatively good interet rates on those savings). NTL, 3 months in this day and age isn't enough IMO. At least 6.
Also, I would argue that "savings" isn't protection of purchasing power; It's capital preservation. A dollar put into the bank today is still a dollar tomorrow compared to an investment which may be more or less tomorrow.
Bella
Anyone here ever read "Conquer the Crash" by Robert Prechter? He has a different perspective on the dollar vs. gold and silver (and commodities such as food and oil). Might be worth reading with an open mind before taking the actions encouraged in this post.