first majestic silver

What's the Price of the Dollar?

April 8, 2002

Every month, my web site gets about 48,000 - 50,000 "hits." This means a lot of you people out there, are curious as to the prices of the various coins, bars, and other forms of bullion type gold and silver. The common query is "What's the price of gold?" "What's the price of silver?" The reverse should be true, namely "What's the price of the dollar today?" Why? Simple! Gold and silver are constants, and have been for thousands of years. Their supply and demand may vary, but even then, they are constant measurements.

Until FDR screwed everything up, and his successors, of course, added to the misery, gold was $20.43 per ounce. In other words, the price of the dollar was a twentieth ounce of gold. (Wouldn't it be nice to be able to buy an ounce of gold today for a sawbuck?) It had been that way for over a hundred years. After FDR's robbery, the price of the dollar was a thirty fifth of an ounce of gold. Those that turned in their gold got screwed. Those that saved in dollars also got the shaft. Everyone got it! Today, the price of the dollar is under a three hundredth of an ounce of gold. In other words, the dollar is losing ground fast, while gold is as stable as a rock.

The same comparisons hold true for every single fiat currency in the entire world, including the highly regarded Swiss Franc. All currencies today, are "fiat," and have no set value of any kind. The price of the dollar, is a third of a pound of butter, or a forty thousandth of a new Dodge diesel pickup. The price of the dollar has no relation to the butter, gold, or pickup, as they are constants. How can a pound of butter or ounce of gold change? They can't! It's the medium used to exchange them for, that changes. A lousy medium.

Before FDR, an ounce of gold and a twenty-dollar bill were synonymous. My home is "worth" more than $400,000, because I have been offered that, and refused. I put "worth" in quotes, because I wouldn't trade my home for $400,000 in worthless scrip, known as dollars. It's 3350 square feet, and built in 1887 for about $8,000. IT'S THE SAME HOUSE AS IT WAS IN 1887! It hasn't been moved, or changed in any great way, so it is worth the same as when it was built.

While I have a 1941 Plymouth flat bed pickup that cost $400 when new, and is now "worth" $18,000, it hasn't changed. It's within 60 miles of where it was bought by Mountain States Telephone & Telegraph Co. and has the same engine. The fact that I did a frame-up restoration 25 years ago, only made it the same condition as it was in when 'Ma Bell' bought it for $400. IT IS THE SAME TRUCK. Of course Stott's law comes into effect here a bit, which states that, "The more of anything there is, the less they will be worth," but the point is made. There may have been 2,000 of these trucks made, and only one still exists, as far as I know…mine, but nothing else has changed.

In the tiny little lovely town of Silverton, Colorado, 60 miles from where I live, exists a 40 room hotel built in 1883, called the Grand Imperial. In 1971, to keep it from being demolished (I love old things) I bought it for $81,000. It was pretty bad, and I put it on its feet and sold it in May, 1975 for $500,000. Today it is listed for $3 million. It's the same property. Since it hasn't sold, one can't price the dollar in terms of the Grand Imperial Hotel, but you get the idea.

So why save in dollars? I would like just one answer, please, that would explain why anyone in their right mind would store surplus assets in dollars. There must be a good reason, because most people in the world save in their local fiat "money," but what is it? Argentines saved in Argentine pesos, and their price has gone from $1.00 to 25 cents quickly. This measures the Argentine peso in dollars, which is a false measurement. It would be far more accurate, to say the price of the peso has gone from a three hundredth of an ounce of gold to a twelve hundredth of an ounce of gold. Those in Argentina, according to the NY Times, customers of Citibank are screaming bloody murder, and are going to sue the bank for deceiving them. One woman's savings account with Citibank has gone from $250,000 to less than $80,000. Citibank promised her security, she says, and didn't deliver. I am sure Citibank did as they promised, because her pesos are still there, correct? Her pesos can be had, just as they could always be had, by merely going to the bank, and taking them out. The bank didn't default. The issuer of the peso defaulted, as in 100% of similar cases around the world…her government. If you put 600 dollars in a savings account in 1941, it would have bought a new Ford. The fact that the new Ford costs close to $30,000 isn't the bank's fault, but the US government's, which insists on wearing out countless printing presses, and cutting down huge forests, to fabricate this garbage.

The price of the dollar, is close to a fifth of an ounce of silver, a tenth of an ounce of a new computer, and almost half gallon of gasoline. Ever wonder where the term "buck," which is slang for dollar, came from? It seems that in the late 1800's a fellow named George Washington Miller built himself what would today be called a "theme park." It was in Oklahoma, and was called the "101." It was quite popular, and featured fake bank robberies, Indian fights, cowboy tricks, stagecoach holdups, and rodeo skills. He had a lot of employees, and printed his own money for his employees to use. He called his money…"bucks." Virtually the same thing goes on at Disney properties today, and these are called "Disney Dollars." Guess what? Disney Dollars are generally exchanged outside the Disney parks, with real fiat dollars among local merchants. What's the difference? The price of a Disney Dollar is the same as a US dollar, for all practical purposes. Doesn't that inspire you? Isn't it nice to know you are saving surplus assets in a denomination that is equal to a Mickey Mouse version of the same instrument?

All humans are blessed with automatic reactions, to certain stimuli. We pull our hand from a hot stove, laugh at a joke, scream with fear, etc. We automatically say "that price has gone up," when considering the purchase of an item, or exclaim "that's expensive," when we refer to the price of something. "Gold has gone up," "silver has gone up," or "tires have gone up," are automatic phrases we all use. It's to be expected, since we are, from childhood, used to uttering such phrases, and thinking along those terms. I do it, as do you. In a previous piece, I spoke of the fun house at Glen Echo Park (Isn't that a pretty name?) near Washington DC, as having an admission price of 16 cents for all day. It was true, and the trolley ride to Glen Echo was a dime. A coke was a nickel, and my Mom and Dad bought a 6 bedroom, 3 storey, brick house, in a nice neighborhood of DC, in 1935, for $3500. Glen Echo is gone, and the trolley cars are gone, but that house is still there, and it is, I am sure, at least 60 times that price of 1935, in fading dollars. It is the same house.

So why do people save in dollars? Answer please. If you ever watch "Antiques Roadshow," as I do, I often want to scream at the appraiser, something to the effect of: "Of course it is worth a lot more now, you dummy, because the owner has had it for 40 years, and the dollar is worth a pittance of what it was then!" There are genuine increases in prices, in dollars, thanks to Stott's Law, of course. These owners of antiques on the show, have saved in antiques, rather than dollars, and their astute investment has paid off royally. But their expressions belie the fact that they do not realize that part of the escalation in fake "money," is from the utter debasement of the currency, as well as Stott's Law coming into play. There are damned few paintings by noted, dead artists around. Death seems to halt their production, and if they were good, their work will go up in excess of the currency's failure rate, inaccurately known as "inflation.". No one makes old cars, old furniture, old comic books, and old stamps today, and most of those that were made, have long since disappeared, so saving in antiques makes sense. I have them all, but mostly am saving surplus assets in a safe whose contents are so compact and universally recognized for value and hedge, that I never have to worry about appraisals. As far as antique coins, or numismatics, I am still against them. Unlike antique paintings, or other useful items, these are purely to store away, and not be seen, enjoyed, and used. I use my truck, love to look at wonderful wall hangings, and eat on, and store things in antique furniture. So as far as gold and silver are concerned, get the most for the least dollars, as it makes no sense to get the least gold and silver for the most dollars, which is what numismatics are. When you want to sell, and re-convert into dollars, bullion coins never have to be appraised, and are so close to the spot price of the metals, they are instantly saleable.

But by all means act wisely and protect yourself.

USA has the world’s largest holdings of gold: 8,134 - representing 77% of its Total Foreign Reserves.
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