Have you been watching Eben Pagan’s daily “Money’s Dirty Secrets” videos the last few days? He’s been releasing a new video each day for 4 days. You can see them here at his Self-Made Wealth Blog
There have been a lot of really interesting posts by people after each video. Here was one that caught my eye about money, inflation, and the ever-decreasing value of our dollar and its buying power:
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by Al H:
Here’s a story of how I learned a great lesson about the difference in money and assets.
My father had a habit of taking the change from his pockets each night and putting it in a jar. When the jar filled up he’d put it in the bank, or change it to bills and buy something for our family to enjoy. A nice habit when those coins were mostly silver.
Today, I own some of those coins … pre-1964 coins that were 90% silver content.
Up until recently I would occasionally check the price of silver and figure out how much those coins were worth in dollars. But a few weeks ago I decided to do something different. I went to Google and searched for what things cost in 1960.
Next, I calculated the amount of silver in each coin. For example, a silver dollar contains 0.7735 oz. of silver. Silver is about $17 per oz. currently, so one of these silver dollars is worth about $13 in paper money. This is the melt value of these coins, it is not the value of mint condition, uncirculated coins … just the regular coins anyone living prior to 1964 had rattling around in their pockets everyday.
When I compared what I could buy today if I converted those coins to dollars, I got a real solid understanding of money inflation. It was a good lesson in understanding asset appreciation, price inflation and the purchasing power of today’s fiat money.
Here’s some examples of what I found:
In 1960 an average new home cost $12,700. $12,700 in pre-1964 used silver dollars equals about 9823 oz. of silver. Silver is around $17 an ounce currently. Multiply 9823 x 17 = $166, 991. I think that would buy a fairly good home today.
In 1960 a gallon of gas was about 25 cents. One pre-64 used quarter has 0.1808 oz. of silver. $17x 0.1808= $3.07. Gas in my town is currently around $2.75/gallon. Seems the price of gas has gone down since 1960 in my town at least.
A loaf of bread was also about a quarter in the early 60’s. Can you buy bread for $3.07 today. I can buy 2 loaves with that.
Average cost of a new car in 1960 was $2600.00. 2600 used silver dollars = 2011 oz. silver x $17 = $34,187. That won’t buy a luxury car, but still will give you a wide variety of choices.
And if I was earning $6000 per year in the mid ’60s I’d have been earning the average wage. $6000 in silver coins would be about 4641 oz. of silver. At $17/oz that would equal $78,897.00. Not sure what it is today, but in 2008 the average wage was $40,523. I’d prefer $6000 per year if you pay me in silver!
For me the lesson, aside from being a nostalgic trip back to the past, was seeing how focusing on an asset, something of value, is very different than focusing on dollars … that is dollars that leave me dependent on the trustworthiness and promises of bankers and government officials.
I now truly know the difference in wealth and money, and agree 100% with the statement that money is NOT wealth. Wonder what our economy would be like today if we still had money backed by silver and gold!
