Welcome to my Paragon Theory, a Gateway to a New World of Personal & Financial Freedom.
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The 7 Steps to Freedom Step 3: Buy Gold & Silver, The Only “Real” Money
Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way
of this insidious process. It stands as a protector of property rights. Alan Greenspan (1966)You’ve probably heard “educated” people and even some economists refer to gold as that “barbarous relic”, as if precious metals were somehow irrelevant in the modern world. But nothing could be further from the truth. In fact, in the wake of the banking crisis and the growing sovereign debt debacle, gold and silver are starting to come into their own and represent a serious asset class you cannot afford to ignore.
But why gold and silver? To answer that question it’s important to understand what paper fiat money is. It’s money by “decree”, or money that is made money by legal declaration. This paper money, and the fractional reserve banking system that generates it, is supported soley by faith, faith that the government backing the paper money is sound and honest. However, the truth is that both paper money and fractional reserve banking are a fraud, a giant ponzi scheme that is bound to crash and burn. And the reality of this is becoming clearer every day.
Gold, on the other hand, represents money as it has evolved in the free market over a period of 2,630 years - from 700 BC to 1930 AD. Precious metals became money due to the obvious qualities they exhibit - including the fact they cannot be “forged”, are durable, divisible, portable, and widely accepted as a means of exchange etc.
The important thing to understand, regarding the difference between paper fiat money and gold or silver, is that the latter cannot be created “out of nothing”, as paper money is. And it is this fact which is responsible for governments all over the world abandoning gold as money - because it placed restrictions on their ability to spend and control.
In the present economic environment, where governments everywhere are printing money like there’s no tomorrow in order to “reflate” the economy, the value of gold and silver as money is becoming more and more obvious. Why? Because at the end of the day you have to ask yourself whether you would rather hold precious metals that historically protect against currency devaluation, or prefer holding on to potentially “Weimar” or “Zimbabwe” money - that is, money that has the potential to devalue to the level of toilet paper.
To illustrate this fact, that gold holds its value compared with fiat paper money, consider this:
According to the Minneapolis Federal Reserve, since 1935 the US Dollar has lost 93.5% of its value. That means if you had put $100 under your mattress in 1935, its purchasing power today would be just $6.50. But if you had simply held gold since that time you wouldn’t have lost any purchasing power at all – as the following illustrates:
In 1935, when an ounce of gold was worth $35, you could buy:
- a top-quality tailored suit for $19.75 – or 0.56 ounces of gold
- a family car for $500 – or 14.3 ounces of gold
- a house for $7,150 – or 204.2 ounces of gold
- that same top-quality, tailored suit costs $600 – or 0.56 ounces of gold
- the family car now costs $15,000 – or 14.2 ounces of gold
- the house averages $181,100 – or 204.6 ounces of gold (average house price from 2008 / gold at 2008 price of $880/ounce)
Just as banking offshore provides “insurance” against possible confiscation and monetary devaluation of your own government’s paper money - by putting your money in other countries and currencies - so gold provides “super insurance” against all paper monies. And just as it’s wise to have your money held offshore, it’s also wise to have your gold stored offshore, outside your home country. In fact, with gold and silver you can apply a dual holding strategy. You can physically possess gold and silver coins, as insurance against any possible currency collapse at home. And you can store larger quantities of gold or silver in reputable overseas vaults, to protect against any possible consfiscation edict that could be issued by your own government.
How much gold and/or silver should you own? Personally I suggest converting 50% of your cash savings into “real” money. Obviously you need access to paper cash for day to day living, but when it comes to any long-term savings, then you should most definitely diversify into precious metals.
The other important thing to remember is that you can always sell off gold or silver on the spot market at any time, which provides virtually instant liquidity for your holdings.
The time to buy gold and/or silver is now - not later. If you have any reasonable amounts of cash as savings, then it would be prudent to convert a good percentage of that into gold or silver (or both) at your earliest convenience.
