What can be done when the villain stealing your money and reducing your wages while also driving your living costs higher is your government? Not much, but there are a few things, assuming you can’t replace your government.
First to consider is the government-sponsored, perennial inflation. Government creates inflation with its endless manufactures of credit and money that dilute the value of what’s already out there. My father’s new 1937 Chevy that cost $750 provides the data. Had he put away 10% of an average $3,000 wage for 20 years for retirement, he’d have had $6,000 to retire on in 1957 by which time a new Chevy would have cost about three times more than he paid. The government’s inflation had stolen two thirds of his money’s purchasing power.
Consider instead, some smart investor who bought gold as an inflation hedge. He bought 100 ozs. of gold at $35 an ounce, the government’s controlled price in 1937. If he sold his gold before 1968, he received the same $35 oz. he paid for it; the government still controlled the price. Whatever inflation had occurred simply devalued his gold as well as his money. But say he didn’t sell until 1977; government didn’t control the price anymore, he’d have received $148 oz. Most of that price difference was of course, inflation. And since he’d sold his gold for more dollars than he’d paid for it, that ‘profit’ was a taxable capital gain. Government not only stole his purchasing power through inflation, it taxed him on the amount it had stolen.
The speakers of Yiddish use “chutzpah” to describe what English speakers mean by “gall.” Their definition is a man asking mercy for murdering his parents because he is an orphan. Our governors could give that guy lessons! To begin with, they fund their promises with your money, right? And it goes downhill from there…
A taxpaying citizen today is playing in a casino where he has to bet against the house and the dealer while taking their word on his payoff. And the house has been overspending, owes huge debts and is desperate for the players’ money. What can be done?
Hell, I don’t know; who do you think I am, Superman? God? Ben Bernanke? I can mention a few little things that people do, though, things that may help some. No miracles though, a rigged game is after all, rigged. You may reduce the damage; you can’t win.
People move into foreign investments that aren’t measured in dollars…if they can find a currency stronger than the suicidal dollar. It’s not the Euro or the Yen or the Pound Sterling; they’re all strong as a wet napkin. Maybe Swiss Francs? But so many are trying to crowd in there that the price seems pretty rich.
Then there are commodities to invest in, real estate which can be a lot more effort, and of course, that gold we were talking about. If you’ve chosen well or are lucky, you’ll gain rather than lose money.as the economy and its dollar go south. But remember, declining economies often take commodity values with them. And if you gain, you’ll be taxed on both any profit and the inflation involved. Heads, government wins; tails, you lose, right?
Stocks? You must be feeling lucky…the stock market is still overvalued and will, at some point, go ker-plunk and stay down for a long time. If I buy stocks, you’ll know that’s imminent… I have that talent!
Stuff the mattress? Well, you may not get much sleep that way, especially after the neighbors’ kids find out from your kids. In case of a replay of the Great Depression bank shutdown or some such case, it may be good to have a stash of $100 dollar bills tucked quietly away and perhaps some U.S. Mint silver dollars too, for extremes. You might find it a big help during a major bank re-boot, which could happen. And you might, if you’ve not already, consider a (gasp!) gun or two. Real ones, nothing wimpy.
I am not advising on what to do with the bulk (ha, ha,) of one’s money, especially when money itself is declining in value. Bonds are money that is owed so you risk not collecting and money value loss at the same time. But they’re pretty stable until they default, usually, so I keep some investment grade bonds. After the coming market decline, I’ll likely grab some conservative stocks for the long haul. And for now, some precious metals to help with the declining dollar. Some real estate will become more appealing when, as with stocks, the stalled decline has occurred. And some carefully selected commodities, again not in a hurry.
I’ll likely lose money with some of it but might make some elsewhere to balance…the idea is survival, not riches in times like these.But Hell, I don’t really know what I’m doing…how could I, when the President and Congress clearly don’t either? But in their case, it’s not their money they’re gambling…