Offset the Decline of the U.S. Dollar….
To date, the US Dollar has lost in excess of 35% of its value, and experts say that this is only the beginning. The government is now openly predicting another 30-34% decline which will result in our cost of living to increase exponentially in years to come, thereby causing other havoc. The only true protection we have available is if you put yourself on the “gold standard” by owning a percentage of gold to hedge other investments. As you will see
from the examples below, the purchasing power of currencies demonstrate how, over time, the only thing that has maintained its true “purchasing power” is via gold investments.
Precious metals, such as gold, is reaching up to new heights. It seems as if the U.S. Dollar - which is flooding the world with our trade imbalance - is in for an even worse time. It kicked up to $2.00 against the British pound just recently, the highest in 25 years.
In 1985, the U.S. Dollar was at $1.04 against the Pound, meaning one Pound was equal to $1.04 of the U.S. Dollar. The value of the U.S. Dollar has dropped substantially since then, leveling off, and then plummeting again to $2.00 which is roughly half of what it was in 1985.
The Yen in 1971 was 360 Yen to the U.S. Dollar. Today, it has dropped down to the point of where one dollar is getting a little over 117 Yen. The U.S. Dollar has gone down about 2/3 against the Yen in that period of time.
As you look at the price of the U.S. Dollar itself, what you could buy in 1944 for $10 cost $143.69 in 2006. We have lost about 14-15 times and, in certain other areas, as much as 16 times the value of the dollar between 1940 and 2006. Lastly, in 2006 it took $10 to buy what took $0.70 to buy in 1940.
The U.S. Dollar was stable for almost 100 years. What changed? As long as it was linked to gold, it didn’t vary that much, but once the fed broke the link to gold, and began printing money, the value of the U.S. Dollar started its now-continual spiral downward. In fact, it is expected to decline another 30-40% before it’s over.
If you had $100,000 in savings years ago, that same account might be worth $20,000 or $30,000 at best, or even $10,000 or maybe even $5,000 when it comes to the “actual” purchasing power - from what it had years ago to today‘s decline. This is why so many analysts are saying that we should diversify our portfolios in gold, which will be safer than many other ways to invest, or maintaining your money in a bank or a savings account.
History has proven time and time again that neither bankers nor governments possess the discipline needed to limit the amount of credit (or paper money) to equal the true supply of gold. The result is always disastrous in the long-term because the economy suffers through cycles of inflation, deflation, artificial growth, recession and depression. Because U.S. citizens did not protest the use of trust money, our economic system then began to degenerate into untrustworthy or “fiat” money. Fiat or “paper money” abandons any promise whatsoever to redeem the paper currency in any physical commodity. That is why many countries today are backing their currency with gold… which is why their currency is stronger!
The Value of the US Dollar….
Have you noticed lately that CNBC (and others) are now displaying the value of our declining US Dollar in comparison to the Euro in the same fashion as they display the price of gold and oil? Just a few months ago, no one was talking about it. Now, they have announced (or publicly admitted) that their intentions are to allow our US Dollar to continue to decline another 40% - in addition to the 30% it has already been devalued over the last year. (Jim Burg can fill you in on the details when you call.)
Gold is Money, not a Commodity:
Despite what many people tend to think, gold is not a commodity. Commodities, to have value, they must be used and consumed. For example: If any commodity were to have an available inventory that even approached 100 years of annualized production, that commodity would be worthless. As gold is highly valued, and has an inventory base equal to 100 years of annualized production, it is money. For another example, in 1920 a $20 gold coin ($20 Saint Gaudens or a $20 Liberty) would pay for a man’s suite. Today, that same 1920 $20 gold coin (albeit a $20 Saint Gaudens or a $20 Liberty) would pay for a man’s suit… make sense?
Gold maintains its purchasing power:
The US dollar, the world’s premier “hard” currency, has lost 95% of its purchasing power over the last century and will never recover that loss. If you were to price things with real money (or “constant” dollars, adjusted for inflation) over the long term, a high quality man’s suit, or 300 loaves of bread, or 47 ounces of silver would have an average cost of about one ounce of gold. In 1900, an ounce of gold bought 300 loaves of bread. Several years ago, it would still buy 300 loaves, while today, an ounce is roughly equivalent to 225 loaves. On the other hand, the US dollar that bought 14.5 loaves of bread in 1900 buys only 3/4 of a loaf today. Five years from now, a dollar may buy only one slice!
Among the many attributes that single it out as a near perfect form of money is the fact that unlike all irredeemable currencies, gold coin investments has a long and successful history of being a store of value, a measure of value and a medium of exchange. It is acceptable, homogeneous, divisible, incapable of being counterfeited, durable, stable in value (over time), and portable. These qualities make up the definition of money, and over time nothing but gold has met the definition of money.
Gold has more purchasing power:
If gold is money, then its supply is a positive, not a negative. With four billion ounces in its “float,” gold is man’s most abundant single homogeneous tangible product. People have an interest in gold ownership, if not to spend, then to save. When an owner of gold decides to use it to purchase something, that act does not increase gold’s supply. The same is true when someone decides to sell something for gold; that act does not reduce gold’s supply. This is true even if the exchange involves gold for currency.
The best way to view gold is (1) as real money and (2) as insurance.
However, gold ownership is also an investment, because an investment provides a return. Select gold coins act as financial insurance against the blunders and the corruption of politicians. Since the beginning of recorded history, politicians have destroyed every currency ever created, and in due time they will destroy what’s left of the dollar too (which is what they have been doing since the 1940s).
The Decline of the “Fiat” Dollar:
“It is clear from the chart that the precipitous decline in the fiat dollar’s purchasing power since 1933 (when the domestic gold standard was abandoned) has been interrupted briefly at several ‘disinflationary’ or deflationary junctures. These are indicated in the circled portions of the curve. But anyone who believed during those episodes that ‘inflation’ was permanently ended obviously was seriously mistaken.
More recently, price inflation has averaged a relatively modest 2.6 percent annually for the past 6 years - a longer period than any of the earlier episodes of reduced price inflation. However, even this rate would halve the purchasing power of the US dollar in 30 years.
Alan Greenspan, the Chairman of the Federal Reserve Board, admits that price stability has not yet been achieved, and he recently said that many of the factors currently restraining price inflation ‘are not necessarily long lasting.’ In short, given the long-term history of the fiat dollar, it is premature to assert that ‘inflation is dead’ based on the favorable experience of the past few years.
Where Are We Headed?
“Where will the trend of monetary inflating eventually lead? Are America’s ‘forgotten citizens’ resigned to having their wealth taken from them? Are they blind to virtually the entire span of recorded human history and do they see only from one moment to the next? If so, they are but sheep to be shorn. And if you, the reader, act like a sheep by growing a new thick coat of ‘wool’ (long-term assets in fixed-dollar value) that can easily be shorn, in all probability you, too, eventually will be shorn like a lamb whether you like it or not.
Only America’s ‘forgotten citizens’ themselves can prevent this fate. Historically, the market solution to the problem of unreliable money has been a return to gold as the monetary unit. Politicians and their banker allies cannot create gold as they can bookkeeping paper dollar entries. They thus cannot manipulate a monetary system based on gold as they can a fiat dollar, or paper-money system.
Vigorous advocacy of a restoration of gold as the nation’s monetary unit at the earliest practicable date would constitute, in our opinion, the only worthwhile evidence of an intent to stop inflating. Mere verbal assurances by politicians that the dollar will not continue to depreciate are not sufficient, and in our view can be translated thus: ‘Stand still, little lamb, to be shorn!’”
The more severe the deflation, the greater the gains in the purchasing power of gold.
During the early years of America’s Industrial Revolution, 1873-96, prices fell by 45%. Gold’s purchasing power increased by 82%. From 1920-23, prices declined by 69%, but gold’s purchasing power rose by 251%.
Why Buy Gold in a Deflation?
“Bullion Goes Bust As Nations Weigh Precious Metal’s Role,” was the headline in the December 10th, 1997 issue of USA Today. For the last two centuries, central banks hoarded gold as “money” and were aware of its role
as a store of value. Among its many virtues, it was easy to store, did not rot or corrode, was desirable, and of reasonably limited availability. Unlike currencies and paper assets, gold carries no liability. It is a pure asset - not
a promise to pay - as are currencies and bonds.
World-Wide Demand for Gold.
Worldwide demand for gold is increasing rapidly, while the supply is shrinking. Each year more and more people in Japan, Asia, the Far East and India have the extra purchasing power necessary to purchase gold. They are buying gold at a record pace. Centuries of experience have convinced them that owning gold is a prudent way to preserve wealth. They also know that gold is the world’s foremost form of “quiet money,” money that can easily be hidden from prying eyes.
The “Global” Economy:
The global economy is sinking into a powerful deflation. There are excesses in manufacturing capacity and real estate around the world. Past excessive debt creation in Southeast Asia, including Japan, has led to massive debt
default, and deepening deflation. The possibility that this deflation will be “exported” to the US and Europe remains a real possibility, and as Jastram pointed out, gold is an asset that performs very well in deflation.
Yourcoinbroker.com is just to give you a few things to think about. I personally will provide you with the most up-to-date information about investing in the gold market - when we talk - as it relates to
gold and silver coins.
Please know that we only sell high quality coins through our company - at huge discounts - through the same wholesalers as other precious metals dealers, saving you up to 75% on the investment spreads - and providing you with a higher return on your investment.
If you have questions about investing in gold, feel free to request a copy of our free e-book “QNA on Gold Investing”. If you have questions regarding the economy, our free e-book “Secrets to
Economic Cycles” might also be of interest to you.
Please know that there is no pressure, ever, in asking questions or requesting information. I’m here to provide answers… I will make my recommendations upon your
request… and leave the rest up to you.
We look forward to speaking with you soon!
Very sincerely yours,
Jim Burg
CEO
Superior Discount Coins
