What Are You Speculating in?

What are you speculating in? Speculators try to foresee the change in something and position themselves to take advantage of that change. Of course, most people don’t think of themselves as speculators, but during times of inflation, they don’t really have a choice.

As Americans (and many other people around the world), we are speculating in the U.S. dollar when we hold them in our wallets, bank accounts or pension funds. We are speculating that the value of those dollars we earn will either stay the same or go up over time…or that they will earn more money than the rate of inflation. Unfortunately, that’s a bad bet. Since 1913, the U.S. dollar has lost roughly 95% of its purchasing power and it’s not done losing yet. For my 2020 prediction, click here. At the same time, gold has gone from roughly $20 per ounce to more than $2,300 per ounce. Silver has gone from about $.60 per ounce to $25 per ounce. As compared with gold and silver, the U.S. dollar has been going steadily downhill.

If I were a speculator, it seems to me that buying silver or gold with my U.S. dollars would be a better bet than keeping my wealth in dollars. Of course, that’s only during the last 110 years, since the founding of the Federal Reserve Bank (the purported guardian of the U.S. dollar).

But you might think that only gold and silver have been affected, so let’s look at potatoes, land, and ammunition, a diverse selection of assets.

According to the Bureau of Labor Statistics, potatoes have increased in price 39.2 times their 1913 prices. According to the University of Missouri Extension Service, the price of farmland in Iowa rose from $108 per acre in 1913, to $9,930 per acre in 2023, or almost 92 times. According to a Sears ad, .22 shorts cost 19 cents per 100 rounds in 1913. Today .22 shorts run $11.45 per 100 rounds at Midsouth Shooters Supply, plus shipping, or about 60 times as much. Any one of those items would have been a better speculation (assuming you could keep potatoes fresh that long) than the U.S. dollar. It seems that just about any tangible asset is a better speculation than the U.S. dollar.

And now we have crypto-currencies. The only one with a permanently limited supply is Bitcoin. All the others can be inflated like fiat currencies. So, unless you are a speculator, and you know more about cryptos than most people, you’d want to stick with Bitcoin for a long-term speculation. Even the U.S. government has agreed that Bitcoin is a commodity, not a security. If you are under 30 years of age, you might find Bitcoin to be a more appealing speculation. Otherwise, maybe you'll be frequenting local auctions. Happy speculating.

Robert F. Sennholz

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