Archive for January 29th, 2019

The 1965 quarter would still buy a gallon of gas

Tuesday, January 29th, 2019

Tonight I ran across an article which repeated a standard “selling point” for gold and silver, and realized it contained a deep error. The selling point goes like this:

“A 1964 (90% silver) quarter can still buy a gallon of gas (once exchanged for today’s paper money), but a 1965 quarter only buys me 25 cents worth of gas (far less than a gallon nowadays).”

Actually the 1965 quarters are now actually worth about $1 now, since they have numismatic value. Still not worth a gallon of gas, but who other than a coin collector would have hung onto a quarter?

The 1965 quarter, no longer silver, is rightfully seen as fiat money, a mere credit backed by debt and promises.  The natural way to hold credit-money is by buying short-term debt, i.e. T-Bills.  Oddly enough, had one used either the 1964 or 1965 quarters to buy and hold a series of 90-day T-Bills, the investment would be worth about $2.87 today… still worth a gallon of gas!

So actually, holding a quarter-dollar in either silver or T-Bill form since 1965 would have kept up with inflation. The true lesson isn’t that owning silver or gold beats owning the dollar.  The lesson is that fiat money, being credit, must be held by owning the balancing debt in order to collect the interest that allows the fiat to retain its value. Today’s credit-money doesn’t belong in jars or under mattresses, but in investments – which can still include gold or silver when the price is right!