October 2, 2008

Should You Be Saving Dollars?

When I was very young, and he was very old, my Great Uncle Billy told me a story about how part of my family got to Texas. I can still see him, setting in the shade on my cousin MaryBeth's huge porch, me on the concrete steps with Texas Stars on each column that bookended the wide front stairs and Billy, in his favorite wooden Adirondack chair.

Uncle Billy, rolling his own cigarettes in trembling leathered, liverspotted hands, would spin tales of robbers and indians and wild beasts, beautiful women and brave gentlemen, and I would be spellbound for hours. And, one thing I remember very clearly: our ancestors had lost everything in Tennessee during the Civil War, and came to the Texas Hill Country to make a fresh start. For this trek, our great-grand-something, Tom, had lined his boots with layers of old Confederate Dollars to keep his feet warm and dry. That's all those dollars were good for anymore.

There's a similar lesson in Gone With the Wind, if you'll remember -- there are taxes to be paid on Tara, and Scarlett's father has put all his savings in now-worthless Confederate paper. Remember? That's when she sews up the green dress and goes to Atlanta....

Of course, we're not facing the devestation of war in this economic crisis - people are looking back in history to the Great Depression not the War Between the States - but the question of how much our dollar will lose value is still one of merit.

How Many Dollars Will You Need Next September to Buy What You Bought This September?

We all know that today's dollar doesn't buy as much as it used to purchase. Your grocery bills over the past few months provide that information. But how weak will the dollar get -- how many dollars will you need next September, to buy the exact same necessities that you bought this September?

1. Krista Das over at the Australian version of the Daily Reckoning interviewed Bill Bodner last December, and here is part of what Bill Bodner had to say (emphasis added):

"In looking at the dollar from a long-term standpoint, it's almost sure that the dollar is going to decline, and someday, go where all paper currency goes, which is to money heaven. That is to say it's going to die. ...

"But the U.S. dollar forecast for 2008 is very, very hard to predict. It depends on what you think is going to happen in the world at large. What I think is that there is going to be a continuation of the credit crunch. I think that we've reached the top, and in fact, that we are past the top of the credit expansion that began more than 25 years ago.

"So we're looking at a major, major top and a major, major turning point in which, now, you could expect asset prices to start down. And if that's true, you're going to see a lot of people who are going to need dollars. They're going to need currency to pay their bills. The credit expansion pushed up the level of debt all throughout the system, not just in the U.S. but worldwide.

"A lot of those debts, most of those debts, are calibrated in dollars so that when people go to pay off the debts, they have to come up with real money. And so I think what we're going to see in 2008 is the first stage of a credit decline, and that's going to mean that people are going to need dollars. They're going to want dollars, and the price of the dollar is probably not going to go down too much. But again, I'm purely speculating on this."


2. Budget Travel reports that right now, the US Dollar buys "about half as much" in 13 western European countries (Spain, France, etc.) than it did only 7 years ago.

3. In November 2007, one "trends researcher" at Information Liberation predicted a Panic in 2008 with the US Dollar "free falling"as much as 90% and gold reaching $2000/ounce. He predicts "the Panic of 2008 will lead to a lower U.S. standard of living."

What Does This Mean to You? Should You Be Saving Dollars?

1. If you are already simplifying your life, then lots of folk that used to think you were crazy, strange, or just plain cheap (have you been called bohemian or a hippie-wannabe yet?) may start looking at you in a whole different light. Heck, they may even ask you how they can simplify too, wouldn't that be nice?

If you're an active simplifier, good for you! Attaboy! Feels good, doesn't it?

2. If you've got excess cash right now, I think I'd be thinking about buying gold with my dollars. I'd save gold not sawbucks. All the folks at Daily Reckoning have been recommending this for years - and history (whether you're looking at the Civil War or the Great Depression) proves it true, gold is a good asset to hold in troubled times.

3. Of course, this assumes that you SAVE. According to the statistics I've been reading on the Web, odds are high that if you are an American - you are not saving, and haven't been in quite awhile. Here's an idea: START.

For more information:

Gold

Very Skeery Stuff

The NestEgg Index and 12 Tips on Saving

1 comment:

Damien said...

Gold is very risky... and over the past 50 years it has yielded only a 5% return... if that.

Be very very careful of Gold!!!


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