G&G Associates Tax & Financial Consulting
The Anti-Printing Press Currency
Imhotep (Wisdom To You),
We didn’t always have government-run fiat money. Indeed, money has evolved over the centuries because freethinking individuals needed a common medium of exchange for their goods and services.
(Without money, you’re stuck with the barter system. That means you must search for individuals who want what you have. If you’re a fisherman, you must trade fish for everything…legal services, gas, produce etc. If you’re a lawyer you need to find fishermen, farmers, dentists, etc. who need your legal services to secure what you need.)
As I've mentioned before, money can be anything. Tobacco, shells, rocks, cigarettes, and cattle have all acted as money in some culture at some point. What do all these things have in common? They’re real, tangible things. More importantly for investors, you can’t make these things out of thin air. Unfortunately, you can’t say the same thing about today’s fiat money.
Governments and central banks constantly create more money. Although most money creation today is merely a few changes in some electronic balances, I still think of paper money as "printing press currencies." And whoever controls the printing press essentially controls the wealth.
They get to be the first ones to spend it. Also, if you own a printing press, you can continue to print as much as you want, so you’re not too worried if your actions cause rising prices. (That’s something for the little people to worry about.)
But the Federal Reserve has a mandate to keep a "‘lid"’ on inflation. If you just look at their appearances in the news, it always seems like inflation is the first thing on their collective minds.
Of course the reality is not so simple. The Fed has been in existence since 1913, with the sole job of keeping our money stable. But the truth is price levels were much more stable before they came along.
If you charted price action like I do, you would see the difference in price levels before the Fed came along. But, then we had another upswing in prices again when you could no longer trade dollars for gold in 1933. That’s when the gold standard was abolished domestically.
[Visit G&G Associates website audio archive to listen to the Creature from Jeckyll Island...this details how the Federal Reserve was created. If you care about your money you might want to listen]
Clearly, anyone looking to preserve their wealth over the long-term needs to hold some of their wealth in anti-printing press currencies. The two that best fit this need are gold and silver. And the best part is they’re available not just as bullion, but also in coins that can have high numismatic value to further condense and easily transfer wealth.
The Money of Kings
Gold is the playbook investment to sidestep the excesses of printing press currencies. It’s not great for small transactions where silver will do, but for a compact and portable store of wealth, gold fits the bill perfectly.
Last week, I hinted about the three best reasons to invest in gold, but it bears repeating. Those reasons are China, India, and Russia. And the reason is simple. It’s not because gold pays an alluring dividend, or because everyone expects inflation. It’s because of the reckless spending in the United States and Western countries. They all have this ridiculous notion that you can simply pluck economic growth off a shelf if you run the printing presses long enough.
Look, we all know where the dollar is going — and gold is measured in dollars. Even at seemingly high prices, gold is still substantially below its 1980 peak, which, adjusted for inflation, would be near $2,600.
In fact, since 1980, all fiat asset classes — leveraged real estate, equities, bonds, currencies, have seen a gain while gold and silver have seen real inflation-adjusted losses. That makes silver and gold compelling anti-currency plays to avoid the excesses of fiat governments.
But frankly, I still like silver more. I'll explain why....next week so stay tuned in.
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LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. Nothing herein should be considered personalized investment advice. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.