1966 VW

November 29, 2002

A fellow called me the other day, and expressed surprise about the use of gold as a storage vehicle for wealth. He told me he bought a new Volkswagen in 1966 for $1995, which then was exactly 57 ounce of gold. He recently bought another new VW, and it was still priced at 57 ounces of gold. His call, his words. Amazing? Not really. Suppose he had taken his 1966 VW and put it up on blocks, and it still had but maybe 10 original miles on it. What would it be worth? According to Hemmings Motor News prices, I think it would be worth about $8,000. Of course for 36 years, there would have had to be covered storage for the vehicle, and probably insurance in case of fire. 36 years of garage rent wouldn't be cheap. If he stored it in his own garage, it would have occupied a lot of space, which has value. After 36 years, the battery would be no good, and probably the tires either. It would have been wise to turn over the engine or even run it briefly during the 36 years, so as not to have it freeze up. Hopefully, the upholstery wouldn't have cracked or been eaten by varmits, and the same with the insulation on the wiring and other rubber things such as windshield gaskets. Merely taking a new car and placing it in a garage on blocks is not all there is to saving its value. Lots of mechanical things decay without use.

(While it is true that it was illegal in America to own gold in 1966, it wasn't in other countries, and when it became "legal' a few years later, the initial free market price still makes the comparison legitimate. People owned gold then, in spite of its illegality. I did.)

Suppose this fellow had placed the $1995 in a savings account at 3%? He would have gotten $5782.05 when he closed the account, and would have owed taxes on $3787.

The $5782.05, before taxes, would have less purchasing power than the original $1995 did in 1966, according to OFFICIAL US GOVERNMENT FIGURES.

Had he bought gold, say 57 Krugerrands, instead of the 1966 VW, they would be worth $18,388.20 today. (Krugerrands were about the only bullion gold coin around then.)

Today, in Argentina, the paper money has become so worthless, that soy beans are being used as "money," because they have actual tangible value, whereas the printing press money has been so proliferated, that it is a joke. Eating a bean staves off starvation, and eating paper money doesn't give one any sustenance.

Locally, where I live, on the Western Slope of Colorado, a new development in my town was begun, called "English Village," about 1966. It is still there, and the homes are very much desired. Originally, they sold for $25,000. Today, they command $125,000. The Volkswagen has gone up 900%, and in English Village, they have gone up 500%, in dollars. Same VW, same homes.

The "money" has gone down in purchasing power 80% or more. Same dollar bills. They look the same. Just like magic, they buy less every week. The Volkswagens are improved perhaps, but the "Beetles" are still loved by millions, and new ones are still being turned out in Mexico. Draw your own conclusions.

Last weekend, we went to Denver. On the way home, we stopped at a gas station for a snack. I saw a "Hostess Filled Twinkies" package, and immediately wanted it, as I hadn't had a "Twinkie" for many years. It was $1.40! I was outraged, and everyone in the place burst out laughing at my protestations. I bought them for a dime when a kid. Same Twinkies…exactly. Luscious. But for $1.40? I am still outraged.

I was in the theatre business for 11 years. My average ticket price was 75 cents. When I had an exclusive run of Goldfinger, in 1963, I raised the price to a dollar. At a theatre in Denver, we saw the new James Bond film, and paid $7.50 for a ticket. (It is horrible. Don't waste your money on it.) A thousand percent raise in ticket prices in 40 years. Not nearly as good a flick as was Goldfinger at a dollar.

I bought a new Mercedes at Bowman Motors on Georgia Ave. N.W. in Washington D.C., in 1962, for $3600. Need more information on that comparison?

Bought my 1887 3350 sq. ft. brick, Queen Anne Victorian, for $150,000 in 1991. It cost $8,000 to build, but included 40 acres in 1887. Now it is on 5 lots of 10,000 square feet. I have turned down $400,000. Same house. Same town. Same dollar bills used, only they are worth a fraction of their past purchasing power.

McDonald's Hamburgers were 13 cents in 1962, and I woofed down quite a few. In the late 40's when I was a kid in DC, a weekly trolley pass, good for as many rides as you wanted was $1.25. Today, no more trolleys, DC is a warren of useless bureaucrats, crime, graffiti, and wreckage, and who would want to ride anything there, at any time, regardless of the price? A fellow might get mugged or killed.

So why do people save in dollars? I haven't the slightest idea. Why do they buy government bonds and notes, when it is the government that is making the dollar worthless? Why don't they realize that the dollar, as a store of value, is about as reliable as a promise from Dubya or New York Mayor Bloomberg? I don't know, but you guys have a wonderful Turkey Day, don't eat too much, and I'll have more to say next week. Of course, Protect yourself!

The Federal Reserve Bank of New York holds the world's largest accumulation of monetary gold.

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