Sunday, May 5, 2013

Worst idea ever

I was just listening to the Friday May 3 Dave Ramsey show.  At the beginning of the second hour, he had a caller whose husband wants to sell their house and use the equity to buy gold bars because he is expecting the US economy to implode (or alternately, to have his parents hold their mortgage instead of the bank).  Oh my goodness.

Here are a few issues that DR did not mention:

1)  In case of inflation, it's the bank that holds the mortgage that has the problem, not the borrower who has a fixed rate mortgage.  The borrower is suddenly able to quickly pay off the loan with Monopoly money.

2) If gold is currently $1500 per ounce and we are expecting it to get more valuable, how the heck do we make change?  Gold bars are as bad a medium as exchange as automobiles--they're just too valuable to be useful for buying small everyday items.  

3) Now, as a medium for storing savings in the case of hyperinflation, there's something to be said for it.  In fact, I didn't realize the significance of it at the time, but when I lived in Russia in the 1990s, Russians with surplus money quickly turned their rubles into American dollars, gold, and apartments.

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