A Real-Life Example of a Gross Loss in Purchasing Power

By Jeff Clark, Senior Analyst, GoldSilver.com

One of the most memorable days of my life was when my daughter was born. As any parent instinctively understands, I swelled with so much pride I thought my chest would burst. 

Grandma was pretty darn happy, too. And she wanted to contribute to our daughter’s financial future. One of the things she did was buy her granddaughter some US savings bonds.

That was in 1993. And now in 2022 we cashed them in, to help my daughter buy a house. You can probably guess what happened next…

The “Almighty” Dollar

Most of the bonds had a face value of $100. We took them to the bank last month to sell them. 

These were United States Series EE Savings Bonds. They were purchased in April 1993, and were sold last month, in April 2022. That’s 29 years of interest, surely an appreciable amount given the long timeframe. At least Grandma assumed so.

The teller logged on to the Treasury site to look up the sales price (they actually call it “negotiating” the bond, ha).

I braced myself; I’m not stupid, I knew what was coming. Grandma didn’t.

“A $100 bond can be cashed in today for $157.76.”

Grandma laughed—surely that wasn’t right! I knew it was, but Grandma was insulted. After 29 years, a $100 savings bond had earned a lousy $57.76 in interest.

I had to get her out of there before she used her cane on the teller.

When I got home, I logged on to CPI inflation Calculator to see what the US government reported as the gain in inflation over the 29-year period. The change in the CPI was +99.66%. So, according to the US government, inflation basically doubled in that timeframe. And that’s using what Mike Maloney affectionately calls the CPLie. I think everyone in America knows inflation is greater than what the government reports.

But even taking the CPI at face value, the 57.7% gain in the savings bond resulted in a 41.9% loss in purchasing power over that period.

The bonds didn’t even come close to maintaining buying power, much less grow it. I don’t think “savings” is the right word to use for US Savings Bonds. It is indeed insulting.

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Shoulda bought Gold, Grandma

Naturally I had to see what gold did during this 29-year span.

Inflation-adjusted, gold GAINED 365.6% in purchasing power, while the savings bond LOST 41.9% in purchasing power. 

Given the long time span, one can’t claim this is a fluke.

Here’s the sobering message to all this:

• This isn’t some theoretical exercise—this is real life. These bonds were supposed to help our daughter fund college, or buy a car, or in this case contribute to a down payment on a home. It failed to provide that ability. Worse, Grandma didn’t realize it till after 29 years—when it was too late.

Had she instead bought gold, our daughter would have over 400% more funds than what the savings bonds provided.

You wanna save for your children or grandchildren? While in the short-term anything can happen, over the long-term there is no debate here. Gold preserves, even grows, purchasing power. Fiat currency does not. Nor some manmade, government paper construct.

As Mike has dedicated his life to pointing out, the structure of the current monetary system basically guarantees that gold will be a far superior savings vehicle.

I know what I’ll be buying my grandkids for their savings. I hope you’ll seriously consider what will best preserve and grow your savings in the years ahead, too.

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