There are some out there who are pro-gold, who use fear tactics like “the end of the world is coming and you better own gold.” You won’t find those types of claims in my articles. However, being that some think the end of the world is coming tomorrow (it’s not), readers may want to know what would happen before any “end of the world” scenario might possibly come.
It’s the end of the world as we know it.
It’s the end of the world as we know it.
It’s the end of the world as we know it and I feel fine.
R.E.M.
It’s not as much the end of the world that investors need to be concerned about, but the possibility of an “end of the currency” that may or may not be in our future. While I do believe there will be a move for all currencies to become weaker via additional printing and quantitative easing by nations leaders and Central Banks, we do have history to draw upon in contemplating such a currency devaluation scenario.
The Argentina Example
You can look to Argentina or even Iceland as two most recent examples of how and why gold (and silver) can be used as a store of value and good alternative to holding actual currency if one believes said currency will be devalued.
In Argentina during their hyperinflation, the world didn’t end with the collapse of the peso. But people did scramble to try and figure out how to conduct commerce with a daily devaluation of the currency occurring.
What some bright folks did was set up swap meets where people could turn in their valuables (gold and silver included) for the “scrip of the day.” This scrip then would be used to purchase food, medicine and other necessities. So if a farmer had tomatoes to sell, he would bring them to the swap meet, receive the scrip of the day and then be able to purchase tools, medicine, other food etc. with his scrip. Those who had gold and silver would be able to exchange this for the scrip the same way. Gold and silver have always had value. The fact that someone may think that over 5,000 years of history are irrelevant is silly.
The Iceland Example
In Iceland, we saw a collapse of the Krona of 75% in one year in 2008 (the stock market lost the same percentage). When people lost “faith” in the currency, even paying 20% in interest didn’t stop the run to convert the Krona to something of value (U.S. dollars, gold, etc).
In October of 2008, I wrote the following article comparing Iceland’s economic data to that of the United States: Iceland vs. USA Economic Analysis, The conclusion was that Iceland’s economic data was superior to the U.S. in almost every category. But what brought Iceland’s economy to a halt? It was what was going on with the banks. This is what will be the subject of a forthcoming article here on the Buy Gold and Silver Safely site. The U.S. Banks are something I have been writing on for quite some time. Have they recovered from the 2008 U.S. financial crisis? Stay tuned…
Why People Own Gold
Gold investors are hedging against this run and potential future runs on the currency. This is what will occur before any collapse of society. So far, for many investors, they are not aware of any currency devaluation occurring. That’s because for the past few years, there was only CNBC and other financial writers bashing gold every time they could. So how does one learn about gold and the devaluation of the currency if they don’t do their own research?
When you compare one currency versus another, it gives the illusion that all is well. Some of the time the U.S. dollar part of the ship is sinking. Other times, the Euro, Pound, Yen part of the ship is sinking. What they fail to realize is that the entire ship is sinking versus gold (and silver). Just look at these current figures for the last 10 years showing the rise in the price of gold in each of the strongest currencies in the world:
Gold has risen more than 400% in multiple currencies the last 10 years. Gold has moved up in price, year over year, every single year for the past 10 years, including the year of the financial crisis, 2008. What has really changed since 2008 to convince you that today, everything is “business as usual?” I can say, that based on my own research, we have not recovered. You may feel wealthier because your 401k has rebounded, but you haven’t locked in that wealth. It’s still subject to the whims of the economy. Iceland’s stock market fell 75% in one year. When the madness of crowds panics, no amount of Fed interference will stop them. The question is, what would trigger this madness? What do you really know about the 1929-1933 era?
What Will Governments Do?
At some point, the leaders (government) will come up with a solution. The question is, will it be gold as currency, a gold backed currency, or some other (probably) non-effective, short term solution to counter the panic like the IMF’s Special Drawing Rights (SDR’s). If it were SDR’s, then why is the IMF continually selling gold? Do they think the world is going to accept SDR’s just because they deem them to have value? Who are they kidding?
Gold is the only asset that can give people peace of mind because of its long term track record. Silver has a long term track record as well.
These Things Take Time
I don’t write about end of the world scenarios as a gold bull. But I can understand economics, politics and simple math. I do believe the banks are the real problem with their over $4 trillion of future sub-investment grade risk maturing in the next 1-5 years with limited counter party to the transactions. It was the banks that were failing in 1929-1933 that the Fed had to halt. Gold is a good hedge against these problems that may occur in the future, the bailouts that will come as a result, and the unsustainable debt that our nation is accruing.
Things won’t implode over night unless one of the nations top banks sets it off. Insurance against this possible scenario alone is reason enough to own gold.
If you haven’t yet invested in gold or silver, download this free report to see what’s really holding you back; 5 Reasons You Haven’t Bought Gold Or Silver
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About Doug EberhardtDoug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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