Sunday, August 28, 2011


I've been diligently saving money the last several years.  I set an automatic transfer to occur each payday so that $500 goes from my checking account to my money market account.  When I started out many years ago, it was $300 and it grew as my salary did.

I put the max in my 401(k) each year.

As a result, I have a pretty good amount of savings.  I know most people don't, so I should feel pretty good.  Right?

Then tonight I read a piece in the September 12, 2011 issue of Forbes called "The Price of Abandoning The Gold Standard".  The article describes the detriments of Nixon's decision to remove the US Dollar from the gold standard back in 1971.

Two things really grabbed me:
  1. The value of the US Dollar has fallen by 70% as compared to the German mark (now euro) and the Japanese yen.
  2. A dollar saved in 1970 is now worth less than $0.20 in today's currency.
One other thing - I was listening to economist Mark Dotzour of The Real Estate Center at Texas A&M today who put the cherry on top of this sludge sundae.  He observed that everyone's recent focus was on the federal government's possible default on the national debt.  Debt that totals $15 TRILLION dollars.  But that isn't the real problem - it's the other big obligation:  the $60 TRILLION dollars that needs to be paid out to cover Social Security.

The federal government doesn't have $75 TRILLION dollars.  How do they get it?  Raising taxes is one option but won't even come close to meeting the obligation.  The other option - and almost certainly what will happen - is that the government will simply print more money.  A lot of it.

My 2011 dollars sitting in a money market earning next to nothing are not going to do it for me.  But real estate - where the cash flow keeps pace with inflation - now that makes sense to me.

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