In December 2009, I wrote an article, Dave Ramsey Doesn’t Know the First Thing About Gold. In this article I pointed to the flawed thinking that Dave Ramsey had about the place gold deserves in a diversified portfolio.
In particular the flaw is related to Ramsey’s observations about the long term track record of gold versus other assets. What Dave Ramsey consistently leaves out of his analysis is that the price of gold was fixed for a good portion of our Federal Reserve Note history and that since 1971, when President Nixon took us off the gold standard (the dollars tie to gold), gold has out-shined the dollar considerably.
Dave Ramsey says to “invest in good long track record.” Why does Dave Ramsey put so much faith in dollars that have a 40 year history of existence without gold backing?
What’s happened in those 40 years Dave?
Well, 46 years ago you could buy a loaf of bread for a Roosevelt Dime. Today, a Roosevelt Dime has the same purchasing power at over $2.00. But what can a dime get you today Dave?
This is reality folks. But it’s worse than Dave Ramsey thinks.
40 Years Of Financial Instability and Debt Growth Since Gold Ties To Dollar Ceased
During the last 40 years we’ve experienced the following;
Savings and Loan crisis of the 80’s that saw the end of FSLIC insurance
Introduction of the Euro (more competition to the U.S. dollar)
We’ve seen the debt of the nation go from the millions to the trillions
We are in the midst of two wars with a President that is sending over 100 drone’s into Pakistan and continual threats on Iran
Meanwhile, Dave Ramsey has continually ridiculed gold while the price keeps moving higher and higher.
So I thought I would take this opportunity to address Ramsey’s latest attack on gold, calling it the “Snuggie of investments” on January 12, 2011, and I thought I would do it at a time when the price of gold and silver are pulling back. The purpose of which is to convince those who have not bought gold or silver to start doing so by dollar cost averaging into a core position.
Dave Ramsey’s Advice Not To Buy Gold Cost You 28.4% In Profit
Dave, gold has gone up 28.4% in value since your October 13th, 2009 article telling people not to buy gold. You didn’t like it then and you don’t like it now. You will never like it, I know. So this article is a waste of time on you.
Your thinking reminds me of a sign in my grandparents basement, “Don’t confuse me with the facts, my mind is already made up.” This article is for those who continually come to my site through Google searches for “Dave Ramsey” and “gold.” I have received quite a few of these people searching for answers over the last year or so the whole time gold has moved up in price.
Here are a couple areas that Dave Ramsey completely ignores:
Dave Ramsey’s Advice: Buy Real Estate
And yet Ramsey’s advice has been and continues to be to put your money in real estate because “it has intrinsic value.”
Has Dave not observed what has occurred in Japan that has seen their real estate values plummet to 15 year lows? Our real estate peak was in 2006. This year, 2011, is year five of the decline. While banks that no longer mark to market the true value of real estate on their financial statements would like to have Dave Ramsey’s dream of higher prices come true, this is not going to occur in a nation that cannot solve its unemployment problems and has no means of production since losing its manufacturing base to Asia and elsewhere.
Where is the demand for real estate in the future going to come from that will push prices higher? We’re still in the midst of a massive deflationary credit contraction with no end in sight.
The time to buy real estate may come in the future, but it’s not now. See Do You Buy Real Estate Now or Wait?
So…Is gold the “Snuggie of investments” like Dave Ramsey thinks it is?
A Snuggie keeps you warm when it’s cold outside. Gold is the Snuggie that insures your portfolio when government loses control of the debt situation and banks implode from within because of their sub-investment grade derivative risk.
As the illusion of wealth (paper assets) chases real wealth represented by gold and silver, peace of mind comes with knowing you’re insured. You insure your house, car, health, and life, but most don’t insure the one thing that pays for all of those. Gold and silver are the insurance against that portion of your portfolio that is U.S. dollar based; U.S. stocks, U.S. corporate bonds, U.S. government bonds, U.S. treasuries, U.S. CD’s etc.
If your portfolio goes up 10% in value and the dollar falls 10%, have you gained any true wealth? This is why you need the insurance gold and silver offer, to counter the dollar’s decline. Our government and Fed will see to it the dollar will decline with their continued spending and quantitative easing. It’s what they do best. And they actually get paid to do this to us!