Gold bullion is a horrible investment Its real return is practically zero over the past 100 years It’s the investment Snuggies of late-night cable television
I’m sure you’ve heard these statements before by popular investment gurus, who either don’t understand or ignore the true value of investing in precious metals.
Putting aside the fact that gold has appreciated at double-digit rates on average this decade against all of the world’s currencies and tripled in price over the past six years, let’s look at the metal not as an investment vehicle but as an insurance policy against loss of purchasing power.
Peruse this idea for just a brief moment.
To protect your home against destruction, you purchase an insurance policy, right? Gold bullion is a form of financial insurance and should be regarded as so. not as an investment but as insurance against the erosion of purchasing power caused by the declining dollar.
Dollar convertibility into gold ended on August 15th 1971, when President Richard Nixon forever closed the gold window. No longer tied to the gold standard, the U.S. dollar could be printed in unlimited quantities or in other words just ‘float.’
Today, after 38 years of being backed by absolutely nothing but the full faith and credit of our U.S. government, our beloved dollar is worth a fraction of what it used to be. if you compare the buying power of that one-dollar bill in 1971 versus today, you would be able to buy only EIGHTEEN CENTS, after adjusting for inflation.
Why The Dollar will Lose Even More Value
In response to the financial crisis of the past year, the government turned on its printing presses to warp speed. As a result, the United States monetary base exploded from $800 billion in August of 2008 to $1.7 trillion. To put that into perspective that means there are now more than two dollars for every dollar that existed a year ago. Never in the course of history has the money supply expanded like this.
Thanks to our government’s monumental spending spree in their attempt to stabilize the financial system and kick-start the economy, our federal budget deficit has now soared to a new record level of $1.42 trillion dollars
If that wasn’t bad enough, our national debt is now over $11 trillion. And unfunded liabilities such as Medicare and Social Security stand at a staggering $58 trillion.
In order to pay for all of this, the government is either going to have to cut spending (aren’t going to happen), raise taxes (get ready) or crank up the printing presses some more and try to print their way out of this mess. And that deficit is projected to rise to $9.1 trillion over the next decade.
A nation just can’t partake in the unchecked money printing in this way without the dollar diving in value and the further the dollar is debased; the higher inflation will rise. This is the reason it is so, crucial that you possess gold. As an insurance policy to protect the buying power of the savings you worked so hard to put away.
Since 1971, the purchasing power of gold has endured and increased. History books are ladened with instances of paper money whose value has been annihilated. But not gold. Gold has endured through wars, inflation, hyperinflation, recession and depression.
Gold bullion is the ultimate store of value and protection of wealth. The value of gold has never been ZERO. Never. it could very well be the most important insurance policy you’ll ever purchase.