Cost vs Value
by Mike Kerlin
Most potential purchasers of precious metals hold back when the cost in fiat currency, seems too high.
The operative word in this statement is "seems".
What most people do not understand is this basic premise:
"The value of all precious metals, relative to their cost in fiat currency, is constant and unchanging,"
How is this possible?
The answer is actually quite simple. If you think back to when this country and the rest of the world, for that matter, were on the Gold standard, inflation was non existent. Prices remained fixed; If you spent $20 on something in 1900, it would cost you $20 in 1920. Why? Because the value of the item was $20 and since you were buying it with a Gold backed currency, it's cost remained fixed.
Then why does something that costs you $20, 20 years ago, now cost you $100 today; you ask?
As I explained above, the items value has not changed, so what has changed then?
The value of the fiat currency you are buying it with has increased for various reasons, the main one is that the quantity of fiat currency in circulation has increased 5 fold.
So, how does this explain why the cost to purchase precious metals has increased, relative to their cost in fiat currency, while their value has remained fixed, and more importantly, what has this got to do with the cost of precious metals today?
The answer is simply this;
The value of precious metals is fixed, as I explained above, the only thing that has changed is its cost in worthless fiat currency. In other words; The Intrinsic value of precious metals has remained the same today as it was in 1930, right before we were taken off the Gold standard, so that the government could inflate the quantity of currency in circulation in order to fund their ever increasing expansion plans. What you could buy in 1930 with $20 in Gold, you can "still" buy today!
If you doubt the reality of this, do the math yourself. For example; You could buy a new Chevy
in 1930 for around $499, or 20 ounces of Gold @ $20 per ounce. Today you can buy that same Chevy for 20 ounces of Gold with Gold @ $1500 per ounce X 20= $30,000!
The bottom line is this; Gold is worth around $20 per ounce in real value, no matter what it cost in fiat currency, so buy precious metals at whatever the current cost with the confidence it will always be worth its true value, relative to its cost in fiat currency.