Actually, at this moment you can buy nearly 2 gallons for a quarter. Now I know what you’re thinking, “what a load of BS”. But really it’s not, and here’s how.
First of all when you look at the price of a gallon of gas these days, current national average of about $3.65, the only thing that comes to mind as most consumers sigh in disgust or curse their local convenient store clerk, is how high the price of gas seems. But in terms of true money, gasoline is actually very cheap. Now before you say “this guy needs to put away the crack pipe”, please read on as we take a brief trip through history.
From the 1920’s up to about 1970 the national average price of gas was about 30 cents a gallon. In fact I remember filling up our metal gas container at the local corner gas station for only a quarter. Now that was 1970-1971 in what was still undeveloped South Florida. Perhaps more densely populated areas like New York or California were a bit higher, but then again average was about 30 cents.
Then in 1971 something happened. It was at this time that President Richard Nixon took the dollar off of the gold standard. In other words, the US dollar was no longer backed by anything tangible, like gold, but was now based on the fact that the US dollar was the world’s reserve currency, strengthened by the fact that OPEC only sold oil to countries who paid with US dollars. Meaning, that if a country wanted to purchase oil, they had to exchange their currency for dollars. Talk about cornering the market (but that is another topic for later).
Furthermore, something else that had occurred six years earlier in 1965 that would have a profound effect on prices today and went quietly unnoticed by the majority of the US population, with the probable exception of any coin and/or precious metal dealers, was the fact that the US mint had changed the metallurgical make up of the country’s coinage. Quarters, and dimes for that matter, were now minted primarily of copper and nickel. Prior to 1965 however, these coins were made up of 90% silver. “So what” you say. Well, here’s what. Historically, it is proven that gold and silver have always retained their intrinsic value, in other words, throughout the entire history of mankind, these precious metals have always been accepted by the populace as true money.
In the past it may simply have been because of their luster. Gold being an inert metal, means that it does not corrode, rust or deteriorate in any capacity. Silver will tarnish, but can easily be polished to perfection. Today the use of these metals is incalculable as they are used not just as a store of monetary value, but can be found in nearly every electronic device in use today. From computers to televisions to cellphones, the industrial use has exploded.
Now, as you may have noticed, the price of gold and silver these days have skyrocketed. This is in direct contrast with the US dollar which seems to be in decline. As we have observed if the dollar is strong, metal prices are low. If the dollar weakens, metals go up. Again, this is because of their intrinsic value. As investors, leave the dollar, they buy precious metals – they do this to preserve their wealth, as a hedge against inflation. And that is the key to being able to buy gasoline for a quarter.
What is inflation? Most see it as rising prices, but in reality what it is, is a decrease in purchasing power of the US dollar. In other words the value of your paper money is worth less and less over time. Prices haven’t risen, your money has become worth, for lack of a better word, “less”. Why this is true is the topic of another blog, but to illustrate my original claim of being able to buy a gallon of gas for a quarter, we need only to look at gas and silver prices.
Today, in the face of a weakening dollar, the price of silver at the time of this writing, is about $34.29 an ounce. A 1964 or earlier quarter is made of .900 silver, i.e. 90%, and weighs 6.25 gm so the total content of pure silver is 0.90 x 6.25 or about 5.63 gm. Add the copper content and you get a value of about $6.192 per quarter. (Source: http://www.coinflation.com/coins/1932-1964-Silver-Washington-Quarter-Value.html) So as you can see, you can purchase nearly 2 gallons of gas for a quarter – provided that quarter was minted prior to 1965.
OK – so it’s not like you can just pull into a gas station, hand the clerk some pre-1965 quarters and fill your gas tank. But in reality, this article is to illustrate to a small extent how a fiat currency system like the one in place in the US can only lead to a loss of wealth. And to make the argument for purchasing precious metals as a way of fending off inflation and preserving one’s wealth. I am not a rich man by any stretch of the word. I am not a stock market investor, I have no impressive financial portfolio, nor am I qualified to dispense financial advice. I’m just an everyday graphic artist making and average middle class income. But I can read, I have eyes to see and ears to hear and what I have learned is it may be prudent to put one’s paper currency in to a hard asset currency like gold and silver or other commodities. I have done just that.
I now own several ounces of silver and I’m not talking about silver on paper, like ETF’s, but have taken physical delivery of actual “in your hand” bullion, both bars and coins. This represents only a small portion of my overall wealth, but it’s a start, and of course I am reminded of the old adage, “don’t put all your eggs in one basket”. But if you will, bear this analogy in mind when thinking about the current economic atmosphere and owning precious metals. You don’t have to be a millionaire to think like one, and who knows, you could just end up as one.
(Oh – and don’t think about tracking down where I live to trying and steal my silver – you won’t find it).
