I covered some introductory basics on gold and silver in the previous blog and now I would like to elaborate a bit on why gold, why silver, why now? So let’s begin again discussing fiat.
Fiat
Today we have what is called “fiat” or more accurately defined as “digital fiat currency”. Fiat simply means a currency with no tangible backing (like being backed by gold and silver for example). Fiat is printed by government decree (or by the Federal Reserve as a stellar example). All currencies today are fiat currencies including the U.S. dollar. This is important to note. According to a study of 775 fiat currencies the average life expectancy of a fiat based currency is 27 years with the shortest being one month and the longest being the British pound sterling at 317 years. Due to excessive printing the pound has lost over 99% of its value since inception. The U.S. dollar as mentioned in other blog posts, became a fiat currency in 1971 when then President Richard Nixon took the dollar off the gold standard known back then as (“The Nixon Shock”), and now 45 years later the U.S. dollar has lots 97% of its purchasing power.
Gold
This is one reason to allocate a portion of your investable assets into gold. Gold acts as an insurance policy and a hedge against collapsing currencies and maintains its purchasing power over time unlike all fiat currencies as history has shown us. The following is a simple but good example to illustrate this point.
Back in the early 1900’s in America, Gold and the U.S. dollar were convertible and an ounce of gold back then was worth about $20.00 so you could walk into your bank with an ounce of gold and redeem it for a $20.00 bill. The U.S. dollar was backed by gold it was not then a fiat currency. So back then a $20.00 bill or an ounce of gold would get you a mans tailored suit, shirt, tie, belt and shoes. What does a $20.00 bill buy you today? Perhaps a cheap tie? But today with gold hovering around the $1,200 dollars an ounce range, if you sold your ounce of gold you can still purchase a mans tailored suit, shirt, tie, belt and shoes. Gold has maintained its purchasing power over time and the fiat currency clearly has not.
You have heard the expression “cash is king”? In reality gold is king and cash is trash so it is probably wise to own some as a tool for preserving your purchasing power especially with what is coming down the pike very soon. There is much more to cover on the subject of gold and silver in the next blog post
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John Michael Chambers has extensive experience having retired from a former career as a successful independent Financial Advisor with over fifteen years experience with seven offices in three states focusing primarily on wealth preservation. Today, John does not work for any investment, real estate, or insurance companies and does not sell investments, gold, silver, real estate or insurance of any kind. When you secure a consulting program, John is working for you as your Wealth Coach. Truly independent non-biased high valued commentary, discussion and analysis in simple to understand straightforward narrative. See Biography for more information about John.