Out of Balance

Our economy is out of balance.  Of course, we all know that on some level, but this imbalance is unprecedented in recent history.  Usually the price of precious metals and the cost of land maintain some sort of correlation.  With the collapse of real estate and the Stock Market back in '07-'09, gold prices were driven up in panic.  Silver followed to a point, but it stayed a bit more stable, only spiking for a short time in 2011.

Obviously, I'm not suggesting that we lay up earthly treasures.  We are not to trust in silver and gold, but rather to see it as an indicator that the economy is more unstable that we are being led to believe.  We absolutely cannot trust in anything that is temporal.  These temporal things are very good indicators, however; as they change we can see the correlation they maintain or lose in the changes.  I'm not a history expert, but as far as I know, this is the first time that precious metals have been artificially inflated to offset the Federal Reserve's zero percent interest rate.  

I had shared with someone in late July or early August of 2011 that gold would begin to drop, and selling was a good idea.  Gold is not really a practical savings plan for future use.  If an economy is using precious metals, making change for even small gold pieces becomes quite challenging.  Now that gold is really just an investment attached to paper, it's just part of the Stock Market and Banking.  Then a couple of years ago, someone asked me what I thought of buying silver at that time.  I told them I believed it would be coming back down around $17.00 an ounce.  I also felt that would be an indicator of more economic instability.  Silver has now dropped to that price range, actually even posting under $17.00 before closing on Friday. 

I don't think we need to run out and buy gold and silver at these lower prices.  What has caught my attention in this recent decline of value, is they are no longer comparable to the price of land.  After the collapse of the housing market, land began to increase in cost, but not necessarily in value.  An acre of land will still only produce so much.  If grain prices drop, and subsidies are reduced, mortgaged farmland will not pay for itself.  The actual value of land is what it will produce.  Although currencies have come and gone throughout history, land and precious metals have always had a comparable value, regardless of inflation, until now.

When I bought this homestead, silver was just under $15.00 an ounce and undeveloped land was between $1500.00 - 3,000.00 an acre, depending upon the size of the acreage.  Larger acreages went for less per acre.  Even small acreages were less than $5,000.00 per acre.  Now, silver is hovering below $17.00 and has been dropping in the last 30 days, while land, even large acreages are bringing $5,000.00 - $10,000.00.  There is still no sizeable new housing construction and cities that were hard hit in the last recession have not rebuilt.  There is little left to lose in another economic recession.

Take inventory, count the costs, and see what is truly of value.  We have just about reached the end of being able to kick the can down the road . . .  The crashing of the stock market sent folks into panic mode for gold, which is not proving to be ready to launch new panic.  The last ditch effort to prop up the economy appears to be survivalist gear for surviving ebola.