# Savings VS Inflation



## machinist (Aug 3, 2010)

How do you prevent the erosion of your savings from inflation? The published inflation rate is debatable, of course, but I think it hits old folks harder, snce we typically are not buying houses that are getting cheaper, but are buying food and fuel, both of which are rising. 

I have read all the conventional wisdom on the subject and don't have a clue now how to keep our savings from vaporizing at about 10% a year. In about 7 years, that cuts the value of savings in half. 

Some of the ideas I have heard involve high risk investments or long term bonds or CD type items. I am DEEPLY suspicious of paper investments now, on the heels of many scandals about banks losing depositors' money. In fact, I am suspicious of banks in general, and the Central banks in particular. So, I have no yearning to entrust my money to banks, or municipal bonds that go bust, or money markets where the .gov says they don't have to give you your money when you want it if they are in trouble. Or, maybe you don't get any of it back at all: http://theintelhub.com/2012/08/24/customer-deposits-are-property-of-the-bank-close-your-account-now/

It all makes the coffee can in the back yard look a lot safer, and while that earns nothing, at least you still have what you started with. 

I am leaning toward some junk silver coins, some stock for my machine shop (in case I have to re-open it and go back to work), and preps in general. That is making more sense to me as prices continue to rise. I (almost) filled my truck and 5 gas cans today and spent $150. Maybe gasoline is a good investment? Thankfully, the truck is small and gets very good mileage. 

Does anyone have a good strategy for preserving your purchasing power? That is, ideas that do NOT involve paper promises of getting your money back... :hair
It would be nice to keep SOME money saved for property taxes and emergencies of whatever kind, without seeing it devalue before your very eyes.


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## HermitJohn (May 10, 2002)

The thing about buying coins above face value is that you have to then pay a broker fee to convert them unless you can sell them on ebay and they get fee too. Not like you can easily convert that silver dime into a gallon of gas. The gas station attendant will only accept it for its face value.

Unfortunately I dont know of any good safe way at present. We have artificially super low interest rates so guaranteed bank accounts are out. You cant even go for other currency anymore. Used to be Swiss francs were good, but Swiss have gotten stupid with their currency in order to try to protect their industry. Their formerly hard currency was hurting sales of their products to other countries.

Hard assets you can use or consume as you suggest. But that doesnt give you much to trade with at least not in quantities you would need. Again you have to either use broker or play salesman to get usable currency unless the other person will trade directly for the item.


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## machinist (Aug 3, 2010)

HermitJohn,

Yes, that is the big downside to PM's. You take a haircut getting in and another getting out. AND! the dot gov wants 28% of any "gain" you make on what is really a hedge against a sinking dollar. 

Of course, any trade goods sort of things also need a buyer that may or may not have what you want. If I put money into steel for the welding shop, then I need customers with MONEY to sell it to before I can go pay my property taxes, license the truck, or buy welding materials to restock. The way things are going, business sucks around here. 

Is there no way to protect ourselves from a devaluation/high or hyperinflation?


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## Ramblin Wreck (Jun 10, 2005)

Maybe the best way to protect yourself and family is to be as self sufficient and efficient as possible. If gas goes up, stay home and enjoy your place. Raise a garden. Cook and can on a wood cookstove to cut energy and food costs...plus you get exercise and better food (which means canning supplies might be a good investment). Use a wood stove for heat and maybe even hot water. Maybe use Netflix instead of cable/dish TV. Cut your phone costs down by eliminating a land line if you have one. Bid out your auto insurance to see if you can save a few dollars.

Inflation is a worry, but if you preserve (as much as is possible) your ability to provide for your family in a self sufficient manner, you've gone a long way to addressing the problem.

Good luck...to us all.


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## Michael W. Smith (Jun 2, 2002)

It's no secret that inflation eats your money. Especially if you have it in a "safe" investment - like a CD or money market account.

Some people might not agree with me, but I think you are probably better off keeping some money invested in GOOD large stock companies.

Walmart, Exxon/Mobil, Coke or Pepsi, Procter & Gamble. Most of those companies give half way decent dividends so even if the stock price doesn't increase from where you bought it, at least you are getting dividends.

I'm not saying you should have ALL your money in stock - but many people as they get ready to retire - move all of their retirement money into safe investments. These people are forgetting, they may live another 20, 30, or 40 years and having all of your money in safe investments is a surefire way to make sure you run out of money.


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## machinist (Aug 3, 2010)

Our landline is part of our wireless internet deal for a total of 60 bucks a month with unlimited long distance. My wife paid 10 bucks for a Tracphone and about $7 a month for minimum minutes. When we can't afford that, I guess we'll revert to the CB radios. 

Got PLPD on the old 1995 truck, $500 deductible on the 2000 truck, and got a package deal with homeowners. We drive <3,000 miles a year. 

Get about $24K/year in SS and can save half of that easily. The last 3 parts I needed for the riding mower I made in the shop. I'm a rich *******, 'cuz I got another mower just like it up on blocks for parts...

If things get too tight, I'll put up another 40 feet of barbed wire and one gate, then turn a calf in the yard and quit mowing altogether. 

Have a 7" TV that runs on 12 volts and uses an antenna. Never had cable or anything resembling that. Don't rent movies, but watch some free oldies on HULU. 

Entertainment tonight was a trip to the Senior Center with a country dance band, at 3 bucks a head admission, coffee and snacks provided. We do go to Goodwill on Sundays for the book sale and get 3 paperbacks for 99 cents. 

But the house has a new metal roof and new gutters to fill our refurbed cistern, both trucks have been rebuilt, stem to stern, and get 28 MPG. That comes out to about 100 gallons of gas a year. Family is all within 10 miles and shopping within 5. Got a buddy who raises hogs and needs welding. Got a neighbor who raises grain and needs things from time to time. The gifts between us are much appreciated between friends. Helped a buddy clean up the pasture after a tornado and he said to cut and haul off as much firewood as I could stand. 

I splurged on a lawn roller last week at the junkyard for $25. Got 5 old bicycles from Freecycle, and I'm making one good one out of the pile for me to get around the neighborhood. Got a couple junk lawnchairs, a plastic tote tub, and a couple 20" bike wheels to make a trailer for the bicycle. 

Our neighborhood networking is up and running. Gotta help each other to stay alive, and it's an old tradition here among farmers. 

I understand the logic behind owning some stocks, but I'd rather buy a beef calf to eat the grass. We are so deep in the ******* life it isn't funny, but it's cheap. I just can't bring myself to buy any kind of paper promise. If I miss out, oh well. 

I see PM's as a TRADE, a speculation for the shorter term, to be played like a fine instrument and when it is maxxed out, drop it like a hot rock and put the money into hard goods, I guess. I'm just real conservative about investing. Okay, I'm a fanatic about having my hands on what I call mine. The problem is illiquidity of hard assets when it is time to pay taxes. I may keep some silver to hedge for that.


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## Ramblin Wreck (Jun 10, 2005)

Sounds to me like you are already in pretty good shape with your skills and neighbors to trade with. Rather have that during bad times than old coins any day.


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## machinist (Aug 3, 2010)

Ramblin Wreck,

Yes, I'm happy with our situation except for how to pay taxes and buy what requires cash. I'm stumped on that.


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## TnAndy (Sep 15, 2005)

machinist said:


> Ramblin Wreck,
> 
> Yes, I'm happy with our situation except for how* to pay taxes* and *buy what requires cash*. I'm stumped on that.



That's why I pulled out all my IRA investments and went all in on silver in 2004/05......at $6/oz.

I fully expect silver to top 100/oz in the next few years.


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## Ramblin Wreck (Jun 10, 2005)

TnAndy said:


> That's why I pulled out all my IRA investments and went all in on silver in 2004/05......at $6/oz.
> 
> I fully expect silver to top 100/oz in the next few years.


Are you holding real silver or pieces of paper that say you own silver?


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## TnAndy (Sep 15, 2005)

Real.....no paper. Paper is promise that may, or may not, happen.


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## bruce2288 (Jul 10, 2009)

Tn Andy, It sounds to me like you have got things pretty well thought out and under control. I hear you about the taxes, that is my #1 priority. I do believe in some precious metals as a store of wealth, not a money maker but if that happens great. It is more of a hedge, if inflation keeps riseing so will the price of the PMs, if inflation stops or deflation occurs, you may loose some on the PMs but then your cash buys more.

The only other thing I would suggest is buying this you KNOW you will need in the future, much like you did with your welding supplies. A years supply of toilet paper will probably be worth more in one year than that amount of money in the bank. Maybe few cases of motor oil, filters for your equipment. You and your wife need to think about what you will be buying in the future and it possible by it now. ie a case of tums, 10 bottles of tylenol, cleaning products, socks and underwear, share boots and shoes, canning lids, sugar. Just a couple of ideas. It sounds like you beleive like I do that prices will be higher in the future so why not buy now.

I agree with paper promises only as good as the word of the party making that promise. In that vein of thought, I would not have all your money in one bank in fact I would make sure I had an amount of cash in your possession. Not in your underwear drawer or the deepfreeze. The old joke about the farmer burying his money in a cream can in cow yard might be a good lesson. A friend has a sizeable amount of PM and did not trust putting it in bank deposit box. I asked where he had it said in gun safe. I asked what he would do if thugs with a gun to his head told him to open it. He would open it. In a tupperware bowl buried in the garden they would never know to ask.


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## TnAndy (Sep 15, 2005)

Bruce:

I think you've mixed me and machinist up. He's the one with the welding shop.

I do have a couple of welders, a Miller Bobcat stick ( 16hp Onan engine driven ), and a small Miller MIG welder, but I don't consider myself a welder. I just use them for farm repairs, and small projects around the place.

I'm also a BIG fan of having lots of tradition goods, like toilet paper, canning jars/lids, petroleum products, etc.....got 10 of these boxes of 144 rolls each up in the lofts of some of my sheds....I figure it's in the neighbor hood of 10 years worth.











Lots of infrastructure developed over the years:

One of our garden areas with storage shed, chicken lot and house in the background:










Meat cutting room I added on the back of the garage couple years ago, w/walk-in cooler. We raise our own beef, pork, chicken, catfish.




















Solar power system (6kw) that eliminates our bill, and has the power company sending us a check for 400-500bucks at year end:










Spring house that holds two 1500gal tanks. Free water, gravity fed to the whole farm. Water without pump !










Movable woodsheds that hold enough for a winter, each:










Earth bermed, solar hot water heated greenhouse to raise winter produce and flowers:






























Everything I've done over the last 30 years has been geared toward making it possible to live on the least amount of "imported income", and produce the most we can on our own. As a result, retirement for us merely a transition from having to work in town, to the enjoyment of working on the farm for ourselves.


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## jwal10 (Jun 5, 2010)

TnAndy said:


> Everything I've done over the last 30 years has been geared toward making it possible to live on the least amount of "imported income", and produce the most we can on our own. As a result, retirement for us merely a transition from having to work in town, to the enjoyment of working on the farm for ourselves.


Sounds good. We have done the same only on a much smaller scale. We have solar and microhydro. Off gris cabin, springhouse, greenhouse, outhouse and rootcellar. We extend the seasons with the greenhouse and hoops and eat fresh as much as possible. Dehydrate most, can some and freeze a little. We gleann the woods and hunt. We have rabbits for meat, chickens for eggs and meat, pigeons for meat and goats for meat, milk and fiber. We don't buy much, barter some and are frugal with our resources. We don't feel deprived, enjoy the journey and stop and smell the roses. The only glitch has been our health and we had a backup plan in place, so for now we are enjoying a life of luxury and letting the next generation do the hard work:happy:....James


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## PNWest (Mar 15, 2010)

Through a tough savings plan, we have one year's worth of property tax money set aside in a secure place.
That is the only advise that I can offer. We are working on the second year, but it is harder and harder.

Our money buys less at the pump and the grocery, but the hard dollars it takes to pay the taxes seems like it is still a dollar for a dollar.

I have had to dust off my memories from my mother's depression stories to get us by.


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## COSunflower (Dec 4, 2006)

I agree PNWest - a dollar isn't worth much nowadays and hard to get. Property taxes are the pits! But - a necessity. I have been trying to think of ways to do with less more and more plus creative ways of earning a little extra on the side to help with things like prop. tax, car repair, dr. bills etc. I'm afraid it's only going to get harder also.


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## ahowes (Sep 1, 2011)

machinist said:


> How do you prevent the erosion of your savings from inflation?


It sounds like you are desparately in need of reading "The Alpha Strategy", a best-selling book by John Pugsley in 1981. It is by far the best advice I have ever received and it is a free download...only 99 pages. I read it in one afternoon a few years ago and haven't looked back.
In a nutshell, he says what you said in your post during the first half of the book where he explains why inflation happens and why it is inevitable, even to the point of completely destroying all that you have saved.
The second part of the book tells you what to do about it. I am living that plan and the only reason I worry about downturns in the economy and inflation is because I hate seeing what it does to those around me that haven't prepared.
Do a google search for that free pdf and you'll be glad you did...
Hope that helps.


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## ldc (Oct 11, 2006)

Years ago, I believe "The Intentional Peasant" wrote about "The Alpha Strategy" for Countryside Magazine. As I recall, he suggests you buy goods for future use. Thx. to ahowes' posting, now I can go read it again!


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## Shrek (May 1, 2002)

Being retired early I have a bit more flexibility and as I did during my years in the rat race and paid myself 12 to15% of my net income as the first service on my budget because as the engineer who introduced me to the concept and my father who agreed said, "if you don't pay yourself as a service providing the income to pay the other services, you have no services provided to you."

During my work years I used overtime to add to my net as required. Now I horse trade a used car, timber etc to add to my net and cover service increases and put 8 to 15% to my savings and investments.


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## ahowes (Sep 1, 2011)

ldc said:


> As I recall, he suggests you buy goods for future use. Thx. to ahowes' posting, now I can go read it again!


I read it about every two years just to make sure I'm staying true to the strategy.

There's quite a bit more to it than buying goods for future use, although that's part of it. From memory, here is the list of things in chronological order to do to prepare for retirement:

1. Invest in knowledge first. This is free and the more you know, the more productive you can be, and the more you can bring in if things go south. You always have your knowledge, they can't take that away in taxes, theft, etc.
2. Invest in tools of your trade. This is for the same reason. If all goes south, or you are in a tough economic spot, you can make more money or bartering material.
3. Purchase consumables - with long shelf life - when they are on sale or in bulk. Of course, it goes without saying that these things should be easy to store. You should only buy the amount that you suspect that you'll use through retirement, or a reasonable length of time. He has many other rules around this, such as don't buy technology or fashion that will go out of style or be rendered useless because newer technology is so much more productive, etc. You have to read the book to do this right.
4. Purchase metals for your investing beyond the above, but not gold/silver. Read the book to learn why.

This is just a great way to beat inflation and taxes and maintain your standard of living through retirement. You can invest in goods and metals and not have to pay capital gains when you sell. An example of a small thing I did years ago was purchase 2-cycle oil every time Rural King ran a sale on it. I bought it for .59 or .79 for a couple of years, an armload at a time. Now that it is up to 1.89, I am realizing a gain of over 100% - tax free - every time I mix up a gallon (which is very often). That's small, but imagine that scenario on everything you purchase.

You MUST read the book.


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## mzgarden (Mar 16, 2012)

ahowes, I'm not able to find a link to The Alpha Strategy for download. I see the author posted it as a free pdf download, but his domain has expired. Do you have a pdf copy that could be shared?

Nevermind, the link I used wouldn't download, but I was helped by Po Boy and here it is for anyone else looking for it:  http://zombieprepdotnet.files.wordpress.com/2012/01/book2-preface.pdf


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## cqp33 (Apr 25, 2013)

Thanks for the link, I have it downloaded and will be reading it this weekend. Seems sound advice, investing in items now that you will need is always a good idea. Looking forward to the read!


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## unregistered168043 (Sep 9, 2011)

TnAndy said:


> Bruce:
> 
> I think you've mixed me and machinist up. He's the one with the welding shop.
> 
> ...



:bow::bow::bow: You are my new hero.


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## unregistered168043 (Sep 9, 2011)

mzgarden said:


> Nevermind, the link I used wouldn't download, but I was helped by Po Boy and here it is for anyone else looking for it: http://zombieprepdotnet.files.wordpress.com/2012/01/book2-preface.pdf



This has just turned into one of the most useful and interesting threads on the forum. Should be a sticky.


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## unregistered168043 (Sep 9, 2011)

Great read, read through it yesterday. The first 6 chapters are basically a lesson in Austrian Business Cycle Theory, which everyone should read. His conclusions and recommendations for holding wealth parallel what I have been thinking and saying for a long time now. At the end he recommends extra $ be invested in commodities like copper through a commodity exchange broker...that scenario seems like holding paper all over again to me, though. Buying a futures contract is, in effect holding a piece of paper that says you will own x amount of a commodity in the future.

If you do decide to take physical delivery of a commodities contract (when the contract reaches its end ) you should be aware that most contracts now are for 'cash settlement' which means you will not ever receive the commodity, you will receive a cash payment. Unless your contract specifies 'physical delivery' even so, only about 2-5% of commodities contracts are held to maturity with physical delivery. I get the feeling from my research that brokers dont like it, it can get too messy.

Other than that, I felt the book was spot on, its always good to hear someone put a pen to ideas that you have been considering.


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## ahowes (Sep 1, 2011)

When I get to that point, I will buy sheet metal or some such - I want it in my possession (as he recommends) so that I can sell it without government tracking. Well, that was at least, until I found out that the ----ed big brother government is tracking all of my online activity. I guess I'll take my chances that they will lose me in the volumes of data.
By buying/selling non-paper tracked materials such as sheet metal, you don't have taxes on the gains...


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## michiganfarmer (Oct 15, 2005)

machinist, yuo and I have nearly identical thought processes. ...avoiding feeding the feds, and the corporate world. If I could pay my property taxes with the maple syrup I make, I would, but the county only accepts federal reserve debt notes.


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