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Letter Re: Ammunition Prices in the Future?
Jim,
I followed the link today about
ammo production declines. Do you have any idea
how this may effect pricing to the public? I hear from some folks that they
expect ammo prices to drop as more of the stockpile hits the market after the
(hopeful) end of hostilities in Iraq, et cetera. I wondered if you had an opinion
of how things may evolve. Thanks, - Jason in Idaho
JWR Replies: I expect ammo prices to remain high, and in
fact continue to climb as long as global commodities prices--especially copper
and lead--remain high.
The
world's credit markets are clearly starting to tighten, which will eventually
slide the global economy into recession, or perhaps even depression. It will
not be until after the wheels of industry slow considerably that
commodities prices will weaken. Then, and only then, will ammo prices start
to level off, and perhaps come down a bit.
You must consider that all of the world's paper currencies
are continuing to inflate on average at around 4% annually, as a baseline.
That means
that there
is no longer such thing as reversion to "the old prices." Unless
governments choose the painful path and opt for deflation, prices will never
go down. Far more likely
they will opt for the painless (in their perspective) path, and inflate their
way out of their economic problems. Inflation is an insidious hidden form of
taxation that gradually robs the citizenry of their buying power, and makes
their savings worth less and less. Governments can inject massive liquidity,
at will, by adjusting central bank interest rates. This creates billions of
electronic Dollars, Yen, and Euros. They can also print as much paper currency
as they'd like. Our current Federal Reserve Chairman has publicly said that
he'd drop money from helicopters, if need be, to stop deflation. (Which earned
him the derisive nickname "Helicopter Ben.")
It is noteworthy that the article mentioned the government's average
cost for a round of rifle ammunition was around 35 cents--and
that is with the "economies of scale" of producing 2+ million rounds
per day! With the current high cost of commodities, commercial ammo makers
would be hard pressed to match that. To put things
in perspective, 35 cents per round equates to $7 per box of 20 cartridges.
(The "cost per 20" is the measure by which most Americans gauge
ammo prices.) Again, $7 is the government's cost.
In the civilian world, there are both wholesale and retail markups before most
products
make
their
way into
the hands of the
buying public. With those markups in mind, and continuing currency inflation
in mind, I don't expect the retail price of any newly produced .308
ball to ever drop below 50 cents a round again. The recent large "dumps" of
Australian and South African military surplus ammo were made at scrap
metal prices--based on the commodities prices of three to five years ago. Those
days are gone. In the current context, those surplus sales were essentially
aberrations,
made because
those nations
no longer fielded significant
numbers of 7.62 mm NATO (.308) rifles. I don't think that we'll see that sort
of largesse very often again in the future.Yes, perhaps after the multinational
deployment in Iraq winds down, there might be some batches of surplus ammo
from foreign governments that hit the market. But keep in mind that the US
government only releases surplus ammo through the Foreign Military
Sales (FMS)
program and through the DoD's Civilian Marksmanship Program (CMP).
The CMP prices are tightly controlled, so as not to cause market volatility,
and ostensibly
to protect
the taxpayers' original investment. (Read: They rarely release surplus ammo
at bargain prices.)
The bottom line: Whenever you find inexpensive,
high quality, common caliber ammunition available at a gun show or at a gun
shop, jump
on it! Some dealers have been slow at re-pricing their inventories
to reflect their increased replacement cost, so take advantage of this. It
is better than money in the bank. In this age of pernicious
inflation, investing in tangibles
makes sense. And, as previously noted in SurvivalBlog, common caliber
ammunition will make a great barter item in the event of a currency collapse.
Just be sure to store your "ballistic wampum" in good quality metal
ammo cans with no interior rust and nice soft seals. Oh yes, and be sure to
toss a small packet of silica
gel in each can to absorb the ambient air moisture.
Stored that way, modern ammunition will still be "sure fire" for
70+ years. A decade
from
now, you'll be very glad that you had the foresight to stock up. Parenthetically,
I'm already thankful for the thousands of rounds of ammo that I bought back
in
the late
1980s and early 1990s--back when both .223 and .308 ball could be had for as
little as $3.50 per box. (And some of that .308 was the outstanding West German
ball. I just wish that I had bought 10 cases!) All those ammo cans are still
stacked up
on the shelves down in the JASBORR.
I consider it all money in the bank and potentially meat on the
table.
Perhaps
three or four decades from
now,
your
grandchildren will be considered "wealthy" because of your
modest investment.
