What we will do here is use basic mathematics to directly compare the value of one commodity to another over time. We will use prices from gasbuddy.com, 24hgold.com, and kitco.com For example, silver and gasoline.
2005 MAY 2011 MAY
$6.96 silver $35 silver
-------------- ---------------
$2.15 gas $3.99 gas
3.23 8.77
The result of each equation is below each. An ounce of silver buys 3.23 gallons of gasoline in 2005 and now buys 8.77 gallons of gasoline today. Say WHAT? Whoa silver buys way more gasoline now than it did six years ago?! How about gold?
2005 may 2011 may
$419.25 $1496
--------- ----------
$2.15 $3.99
195 374.93
Looks like gold is a winner too as well! Well isn't that some crap?! I guess precious metals ARE a store of value after all! Let us see what kind of store of value dollars are. How about a hundred dollars in a bank account? We are going to make that money return 5% compounded yearly, because that is about how good you would of expected a CD, demand deposit, government bond, or other instrument might of yielded you:
2005 may 2011 may
$100 bank $127.60 bank
------- ------------
$2.15 gas $3.99 gas
46.511627 31.97
5% year after year in dollars, and it still has lost value as opposed to filling up your fuel tank. I suspect it is also the same case when you replace gas with food, rent, electricity, and most other essentials. I have found no way to measure food at this point like I can with gasbuddy.com for at the pump prices, so it looks like I am going to be starting that one myself out of necessity. More on that down the road.
The point is that you see, Wall Street and MY street seem to have a different definition of what we call safe, if they are calling dollars that buy 31.26% LESS gallons of gasoline than it did six years ago "safe"!
That is why I measure wealth in ounces of gold and silver, but also beef, sugar, coffee, gallons of milk, iced tea, kilowatts of electricity, water, gallons of gasoline, heating oil, and anything else that uhhh is directly responsible for keeping my ass ALIVE. Commodities, commodities, commodities! They are the real safe over time, they are the ONLY safe over time! It is just that when you have floating currency you are pricing it in, the price of it is just going to go up or down! But Ill gladly call something that is useful, tangible, and sustains life safe any day!
