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Monday, August 19, 2013

That's Devaluation For You

A snippet poached from The Woodpile Report (you do read it EVERY week, right?) -
By simple compounding, all fiat currencies should become effectively worthless about 85 years into their use through the mechanism of compounding. At the end, the accumulated compound debt behind the money simply overwhelms its value as debt goes nonlinear at the end.
--George Ure at 
So, good old President Roosevelt effectively took us off the gold standard in 1933 - 80 years ago.  We've been saddled with a fiat currency ever since.

Before the dirty deed was consummated, an ounce of gold cost you $20.  Today, that same ounce of gold will cost you $1,368 (at the time I'm pushing these keys).

Let's do some math:  The gold standard cost of gold divided by today's cost of gold will give us the current value/purchasing power of a US dollar.

$20 / $1368 = $0.0146

Yep, your all-mighty dollar is now worth a penny and a half.  If you round up.  Help you to understand precious metal's ability to maintain purchasing power?  Let's say gold crashes to half of its current value.  That means your dollar is actually worth three cents.  Livin' large!

Using George Ure's calculation about a fiat currency lasting for 85 years, that leaves us 5 years for that final penny and a half to be pissed away.

Don't spend it all in one place...

Copyright 2013 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates.

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