Archives

stable yardstick

The dollar is a medium of exchange. It enables me to trade my labor for beans, gasoline, shoes and dog food. It is the tool I use for financial planning and measurement. But it is like a yardstick made of rubber. Everything I price today has a different value, when measured in dollars, than the same items did in the recent past and than they will in the near future.

What yardstick should a prudent financial planner to use?

Using the dollar, it appears that oil has gone up dramatically since the politicians gave away ownership of our dollar to private bankers. [Huh?]

You can substitute bread, beans, bullets or bullion and the chart will look very much the same. This is just like riding the DOWN escalator in a large department store. If you ignore the sinking feeling, sporting goods are going up, furniture is going up, housewares are going up, men’s clothes are going up, etc.

Every fiat currency ends in hyperinflation. The US dollar will not be the first to avoid the end result of allowing people unfettered control of the ability to print money when they want.

So how do I plan for the near and short term?
What yardstick do I use to decide if I should spend today’s dollars on chickens or eggs? How can I compare the value of beans to a used economy car?

I rotate all those rising graphs until they are level, then do what I can to move savings and marginal income from commodities that are dropping or can be assured of dropping to those that are not, or better still, those that will rise.

The most obvious move is to hold as few dollars as possible. Related to that is keeping the minimum amount of Federal Reserve Notes (FRNs) in the bank. Whatever budget items I can pay for with cash, I put in my wallet on payday. The next bank failure could be mine, though I did my due-diligence to find a good one.

The pantry gets as much as we can afford. No matter how wisely we choose our employers, our appetite is more reliable than any source of income.

My V-6 4×4 pickup returns 18-20 mpg commuting. Nowhere near good enough. But my spreadsheet tells me that will take me 10 months to pay for an $800 econobox out of the fuel savings. When gasoline prices hit $5 or $6, break-even will come much sooner.

While that is a great return on investment, continued job losses will drive the econobox market down relative to dollars. Thus, it is not quite time for a capital investment in a Honda CRX.

The cleanup and repairs on the old chicken coop are nearly complete. Our next capital investment will be in chicks and setting them up. A reliable source of eggs will escalate in value better than most alternatives. That, canning and winter garden are on my list of best short-term investments with long-term returns.

You too can play this game. The first trick is to believe nothing the snake-oil salesmen are selling. While many think they are better off letting “experts” do their thinking, the fatal assumptions are 1) that their knowledge is perfect and, 2) that they are selling what’s best for you and not for their employer and/or themselves.

black-sheep-heading-upstream