WHY BUY GOLD?
Why Buy Gold? Gold Is REAL!
Unlike paper dollars, gold is a physical asset with permanent valueThis has been a fact for all time – well before the introduction of paper banknotes.
The public is generally unaware how currency came into being. What is certain is that without gold, there would never have been any form of currency anywhere in the world.
Since the beginning of trade among people, gold and other precious metals have been highly valued. They are rare and that makes them an acceptable mode of exchange for goods and services – a measure of gold for a quantity of goods.
As we progressed into the modern age, gold began to be stored in safes and vaults. The vault owner issued notes or certificates to represent the gold account balances. Merchants soon began to accept these paper certificates as payments. The certificates had value because they represented an exact quantity of gold in secure storage. The note holder could – at any time – redeem the note for the face value of gold.
The “Gold Standard” was introduced in 1821. In 1834, one US dollar had a parity value of 1.504632 grams of gold. The Gold Standard was abandoned in 1914 with the outbreak of World War I. It was later re-established in 1928 but due to the relative scarcity of gold, the Gold-Exchange Standard was adopted by most countries supplementing gold reserves for currency dollars.
In time, debt and rising interest rates forced an increase in the manufacture and circulation of paper currency and the disparity between the true value of gold and that of paper currency resulted in a scissor-like divergence.
With the devaluation of the dollar and growing debt, the Gold-Exchange Standard was unilaterally removed by former US President Nixon in 1971. This meant that direct convertibility of the United States dollar to gold was no longer needed. This act was known as “the Nixon Shock”.
Abandonment of the gold standard led the way for governments to print as much paper currency as they required. The real value of money was lost.
Paper money is a product manufactured by human hands. Today the money supply is actually primarily controlled electronically. The Central Banks of every country can “transfer” money to federal or state banks or brokerage firms. These entities can then “leverage” these digital funds hundreds of times over through loans, investments, and other speculative instruments (including the now infamous “derivatives” which lead to the financial crisis.)
Look at the growth of the US monetary base over just the past 12 years:
Reported as of January 1st each year. Source: St. Louis Fed
2001: $ 616.7 billion
2002: $ 673.7 billion
2003: $ 719.6 billion
2004: $ 756.8 billion
2005: $ 793.8 billion
2006: $ 825.2 billion
2007: $ 843.5 billion
2008: $ 851.4 billion
2009: $1,730.2 billion
2010: $2,010.1 billion
2011: $2,057.1 billion
2012: $2,647.7 billion
I’ll do the math for you: the supply of U.S. Dollars has increased by 226% since 2001! Has your income or the value of your home or investments increased 226% over the same period?
Now compare the price of gold to the expanding money supply:
“Money” is created by the Fed out of thin air. The entire expansion of the money supply represents one thing: DEBT! The money supply – which has exploded in the last decade – is 100% debt in the form of Treasury Notes
In contrast, gold is a non-leveraged asset. One ounce of gold is worth whatever the market will pay – no more, no less. “People who own gold, possess money in perpetuity.” This slogan was was quoted by none other than Alan Greenspan, former Chairman of the US Federal Reserve (1987-2006.)
Gold represents true and lasting value. Since colonial times, you could buy a finely tailored suit for one ounce of gold! Over two hundred years ago, a fine suit of clothes could have been bought for $35.00 – the traditional price of one ounce of gold. In 2012, $1,600 – the current price of one ounce of gold – will still buy the finest hand tailored suit!
Back in 1908 you could have bought a new $850 Ford Model T for 10 ounces of gold. Today, you can STILL buy a new $16,000 2012 Ford Focus for the same 10 ounces of gold!
You see, prices are NOT increasing. The value of paper currency is falling – that is, the currency that is backed by NOTHING (known as fiat currency) is experiencing devaluation due to inflation of the money supply.
The value of gold is as an “anti-currency”. That is, gold purchases are a rejection of the fiat system in favor of something wholly tangible that cannot be conjured out of thin air. The price of gold is NOT a bubble!
In times of extreme inflation, as was the case in Germany following World War II when it literally took a wheel barrow of paper currency to buy a loaf of bread, one could buy a house for five grams of gold and three grams of gold would provide for an entire family.
Gold NEEDS to be included in EVERY investment portfolio!
Why buy gold? Gold is financial security for you and your family!
For information on investing in gold, precious metals, and other strategies that will protect you from the coming hyper-inflation that ALWAYS follows debasement of the currency, see The Elevation Group section of this blog, or click on the image below…