Long Term Savings Through Gold

News about America’s economic decline continues to plague media outlets. Additionally, the purchasing power of the United States Dollar (USD) persistently weakens, yet nothing is accurately reported on how middle-class Americans can protect their wealth. Sure, Financial Times, Wall Street Journal and other financial outlets are available but for the majority who do not understand investing principles this is not the correct path to protect their capital. Furthermore, putting a portion of income into a savings account is not the correct answer either as it is earning a negative interest rate in relation to inflation; meaning purchasing power is being reduced. Historical data has demonstrated that silver and gold are an asset that will act as a hedge against inflation over the long run.

Today a USD is only worth its face value because society has accepted this as a means of transaction. Now imagine a world in which currency does not exist and the pantry does not have any food in it for dinner, how do you go about finding food for dinner? You decide to go down to your local restaurant to barter with the owner seeing if you have anything to offer in exchange for a cooked meal. He states that he needs a marketing plan developed to promote his business; this is not your expertise but you know someone who has this skill. You contact him to see if he can develop a marketing plan for the restaurant owner, he agrees but in exchange requires three hours of calculus tutoring for his daughter. Once again this is not your area of expertise but you know someone. This next person agrees to complete the three hours of calculus tutoring in exchange for a fictional libertarian themed book. Finally, your area of expertise has come-up and exchange can be made.

Through this process citizens realized that bartering goods and services is not an efficient means of trade. The decision was made to utilize silver and gold coins as acceptable currency. Value was directly correlated to the supply and demand along with the capital needed for research, extraction and production. Today’s currency has a very low cost of production, in which it is either printed or added electronically. Which is one reason why quantitative easing is debasing the dollar. It is adding money to the supply without a demand (except by the government) through an extremely low cost of production. Moreover, silver and gold has only a limited supply with a strong demand and high production cost which allows it maintains its value.

The past has provided lessons when the government controls the currency (the Federal Reserve is technically a private institution), what would happen if the United States economy reached a state of hyperinflation, how will you be able to survive? The most famous example occurred in Germany between January 1922 and November 1923, in which the price level increased by a factor of 20 billion i.e., doubling every 28 hours. More recently Zimbabwe entered a state of hyperinflation from December 2008 to November 2008 in which data stopped being provided to the unreliability. During this time frame the price level increased 89.7 sextillion percent i.e., doubled of 24.7 hours. The Zimbabwe dollar is now dead and the nation has no currency, it must use foreign currencies. If savings are kept strictly in your local currency, you are in effect entrusting the government with your life savings.

Lastly, is the United States destined for a state of hyperinflation? No, though over the course of time, savings accounts will not provide the needed income for retirement due to steady inflation. Understanding this concept now will better prepare you for the future. Do not think that you must purchase a great deal of silver and gold at once. Slowly building up your supply will provide you the needed protection for the future. On a final note, remember to keep a three to six month supply in USD (or the currency in which you conduct your everyday life), then convert a high percentage to silver or gold; a certain allocation can be set aside for equities. Do not get me wrong, there is money to be made through investments, mutual funds, ETFs etc…but for those who do not understand the principles of investing, silver and gold provide a safe long term investment.