The cost of living & your “savings”

(News & Editorial/ The cost of living & your “savings”)

 reporterA. Correcting Gresham’s Law
6 May 2013,, by Jeff Nielson
Excerpts pasted from:

When one labors at their daily employment; at the end of the day we have earned wealth which is the fruits of our labor. Money is the vessel we use to store that wealth (as savings) in anticipation of converting that wealth into goods and services through using that money as currency in commercial transactions. This immediately brings us to the critical distinction between “money” and mere currency. Money is a store of wealth. It is a “bucket” we use in which to carry our wealth. Obviously in the real world a “leaky bucket” is an item which cannot exist in conceptual terms. No one will use a bucket which leaks. Real money is like a real bucket – it doesn’t leak. For thousands of years; gold and silver have been “buckets” for our wealth; perfectly preserving the fruits of our labors. Then there is mere currency (i.e. paper currency).

Paper currency is not a “bucket.” In the more than 1,000 years in which we have used this pretend-money it has a perfect record: it always loses its value, and then is permanently removed from circulation. (Paper) currency is not a tool to store wealth (i.e. money). Rather it is a grossly inferior tool, which only has the limited usefulness of being a medium for commerce.
As a “store of value”; History tells us all we need to know about paper currencies. In the 100 years since the creation of the Federal Reserve; the U.S dollar (paper currency) has lost 98% of its value. It’s lost roughly 75% of that value in the past 40 years; and roughly half of that lost value has occurred in a little more than a decade.
What would happen if silver (“good money”) was introduced into any economy as a parallel currency? Gresham’s Law tells us such money would “disappear.” This is totally false. Instead, this is what would really happen.

People would use silver as a “store of wealth” (i.e. money), meaning they would save all their wealth in silver. The paper currency, on the other hand, would have only one remaining function: as an instrument of commerce. In any remotely healthy economy; total wealth increases at least as fast as the rate of commerce (i.e. consumption).
…in any economy which has money and currency that money would be used to save wealth, and currency would be used to spend wealth.
The population of any society needs a “store of value” to protect their wealth. The proof of this is the greater-than-50% collapse in our standard of living since the gold standard was assassinated just over 40 years ago – and we no longer had any “money” at all.
Economies can (and do) prosper with money, but not currency. They have never survived a paradigm of currency, but no money.

B.  Report: Water Prices Rise Sharply Across America; Double and Triple in Some Locales
1 October 2012,, Mac Slavo

It’s often overlooked and taken for granted, but it’s the most essential of all human resources. Water.
We’re paying 75% more for it today than we were in the year 2000.

According to a recent study by USA Today, which looked at 100 large municipalities across the country, the price increases over the last decade are so significant that many Americans are having to cut other expenses just to keep up:
…the cost of this necessity of life has outpaced the percentage increases of some of these other utilities, carving a larger slice of household budgets in the process.

“I don’t know how they expect people to keep paying more for water with the cost of gas and day care and everything else going up,” complains Jacquelyn Moncrief, 60, a Philadelphia homeowner who says the price hikes would force her to make food-or-water decisions. She gathered signatures on a petition opposing a proposed water rate increase in her city this year.

USA Today’s study of residential water rates over the past 12 years for large and small water agencies nationwide found that monthly costs doubled for more in 29 localities. The unique look at costs for a diverse mix of water suppliers representing every state and Washington, D.C. found that a resource long taken for granted will continue to become more costly for millions of Americans. Indeed, rates haven’t crested yet because huge costs to upgrade or repair pipes, reservoirs and treatment plants loom nationwide.

In three municipalities — Atlanta, San Francisco and Wilmington, Del. — water costs tripled or more.
Source: USA Today

cost water

According to the report, we can expect rates to continue to rise at a whopping 5% to 15% per year going forward, and for a variety of reasons.

The trend toward higher bills is being driven by:
– The cost of paying off the debt on bonds municipalities issue to fund expensive repairs or upgrades on aging water systems.
– Increases in the cost of electricity, chemicals and fuel used to supply and treat water.
– Compliance with federal government clean-water mandates.
– Rising pension and health care costs for water agency workers.
– Increased security safeguards for water systems since the 9/11 terror attacks

One critical aspect USA Today failed to mention as a reason for higher prices and the adverse effects on our purchasing power is, of course, monetary expansion over this same time period. While water prices are up in the high double digits over the last decade, the same cannot be said for Americans’ wages.
Taking that into consideration, we may well see rates go even higher than estimated.
Coupled with an ever expanding global population, the notion that countries will soon be fighting water wars over this critical resource is not out of the question.
The days of endless clean and cheap water are behind us.

[Question: In the last few years, have you received a 5-15% cost of living pay raise? Are you receiving EVEN 1% on your bank savings? Do YOU personally see prices or costs rising in all of your taxes, in are package sizes shrinking at the grocery, are prices up at Chinamart and for a gallon of gasoline? Are the costs rising faster than your wages? What is happening to your purchasing power, to your ability provide your household with the necessities and niceties of life? Your answers to these question should tell you that the US dollar (and all global currencies) are being devalued. The dollar is a “bucket” in which you trust to carry your accumulated wealth, the bucket is leaking, leaking badly. I recommend that you store your long term wealth in something other than US dollar (any nations paper) denominated assets and use dollars only for immediate trade.
You wouldn’t leave sugar on a plate sitting on your sink for the ants to get, don’t leave your money/savings in cash for inflation to get. Mr. Larry]

C.  If There’s No Inflation, Why Are Prices Up So Much?
12 Mar 2013, Time Business & Money, By Michael Sivy
Pasted from:

 Last week, I ran out of ink for my printer and ordered some more online. My computer automatically pulled up the previous order, and I was shocked to see that the price of the ink cartridges I was buying had gone up 25%. To my mind, ink always seems overpriced. Manufacturers sell printers cheaply because they know that they can make lots of money on the ink. For the same reason, John D. Rockefeller’s Standard Oil is said to have sold millions of cheap kerosene lamps in order to make big profits selling kerosene. But since ink cartridges were already priced way above cost and official statistics show little general inflation, why had ink gone up 25% in less than a year?

cost inflationPrice hikes for a particular item here or there don’t qualify as inflation. If one thing gets more expensive but something else gets cheaper, that’s what economists call a relative price change. Inflation is a simultaneous increase in prices across the board. Some measures of inflation, such as the GDP Deflator, track price changes that affect businesses as well as those that affect consumers. But the Consumer Price Index is supposed to focus on inflation at the consumer level. And the CPI has recorded minimal increases over the past four years. Since the recession ended, the 12-month change in consumer prices has averaged 2% and has never been as high as 4%.

There are lots of other ways to gauge inflation, however, that give very different signals. Gold was $930 an ounce when the recession ended, and today it’s $1,583. So if you believe in the gold standard, prices have increased 70% in four years – or an annualized rate of 14.2%. Of course, many economists dismiss the gold price as an archaic indicator. So it may be more meaningful to look at price increases over a broad range of commodities. The Reuters CRB Commodity Index, which tracks the prices of coffee, cocoa, copper, and cotton, as well as energy, is up 38% over four years, or 8.6% at a compound annual rate.

It may well be that these increases in the cost of raw materials aren’t translating into broader inflation because the economy is so weak. For sustained inflation to get going, workers have to be able to demand higher pay to make up for increases in their cost of living. And today, whatever inflation is caused by the rising cost of raw materials is being offset [I think the author meant to say, “is being made worse”- Mr. Larry] by below-normal increases in wages. Indeed, that’s one of the factors causing the decline in real after-tax household income that I wrote about last week.

That may result in price stability for the overall economy, but it isn’t great news for middle-class American families. It’s true that some important costs have remained moderate. Food prices may fluctuate from season to season, but overall they have risen at only a 2% compound rate since 2009. And in the current real estate market, housing costs haven’t gone up much either. Nonetheless, many of the everyday costs that Americans face have risen a lot.

The price of gasoline has gone up from $2.60 a gallon when the recession ended to $3.68 today. That’s a 41% increase in four years, or an annualized rate of 9%. Taxes have gone up almost as much. Federal, State and Local income taxes and social charges (Social Security payroll taxes, for instance) have risen 35% over four years, an annualized rate of 7.8%.
cost PMs

[Long term protection, long term savings. Mr. Larry]


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