The Disappearing Values of Cash

Thursday 15 September 2011 | Admin at 02:26 |

Once upon a time, gold was the standard - and the value of world currencies were measured by the gold they had to back their currency. With the exchange of the gold standard for the US dollar as the standard - nations now had the freedom to print money as they needed, impacting the buying power of that money.

Everyday, people exchange their cash for goods and services. Very often, these things are consumed and no longer exist beyond the moment; and those that do - very often decrease in value over time. As per this chart, $100 US dollar buys now what approximately $2 bought in 1972.

As another example, based on the value of silver in 1966, if you had $2500 in cash or silver - you could have purchased a brand new Mustang car. If instead, you put the cash and the silver in the bank - fast forward to the year 2011, and with the $2500 cash, you would have a modest down payment on a Mustang; but with the current value of silver, you could purchase three brand new Mustangs, and still have money left over for a luxury cruise.

The act of exchanging your cash for something that lasts beyond the moment, and whose value increases over time will usually be considered valuable, even if the item is a piece of art, a collectible or heirloom. If not, it is at least a purchase that can be enjoyed time and time again offering value, even if that value cannot be quantified in dollars and cents.

Real Estate comes to mind as an example. Traditionally, a real estate purchase has lasting value, can be enjoyed time and time again, and offers value both in quality of lifetime memories and sometimes in re-sale value. In truth, real estate should really be categorized as an expense and not an asset. It exists as an expense with your bank where you hold your mortgage; and even when it is fully paid off, maintenance is expensive and ongoing.

So that brings me to an exciting suggestion. What if you exchanged your cash for quasi-cash? When you buy gold and silver in any form, in most cases you have traded up as globally, currencies buy less and less every year. Gold and silver however, have held their value better, and often seen a significant increase in value. In fact, historically when the world operated on the GOLD STANDARD, the US dollar built its reputation on being as good as gold, allowing for the US currency to replace gold as the standard for trade, local and global commerce.