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.