Should I invest in a gold IRA is the question that still many ordinary folks ask themselves. In this post, I will outline the reasons for ordinary folk to invest in a gold IRA account.
Any investment asset has certain risks, some higher and some lower. The idea when investing is to know exactly what the risks of a particular asset are, in order to make the right decision, the decision that suits your needs best and at the same time minimizes your risk. Over the years, we’ve seen many investors lose their fortunes because they just got too greedy.
Many investors should be asking themselves the should I invest in a gold IRA question more often, this way they will be able to make a better decision regarding their IRA investment.
The same applies to your IRA investment. An IRA invested solely in mainstream assets will put your savings at risk in case of a market crisis.
For example, last year (2020) between February and March the stock market lost 10.000 points. As a result, trillions of dollars invested in stocks bonds, and other mainstream investment products were lost. Many IRA investors had to postpone their actual retirement time, due to low funds in their retirement accounts.
Gold IRA Definition
A gold IRA investment is an individual retirement account, an account that functions the same way as a regular IRA account however, instead of holding paper assets, it holds physical bullion coins or bars.
Gold IRA vs Traditional IRA
A gold IRA is treated by the IRS as any other IRA. The difference between the two is that a mainstream IRA is invested in mainstream assets such as the stock market, government bonds, options, and so on whereas in a gold IRA the money is invested in gold. The IRS has also allowed IRAs to be invested in other precious metals such as silver, platinum, and palladium. Moreover, Cryptocurrency IRAs are also allowed.
A gold IRA is an asset that holds its value, especially during bad economic times. A gold IRA will secure your savings and offer financial stability to your investment.
A traditional IRA investment (401k, SEP, Thrift, Roth, and so on included) invest in traditional assets, such as the stock market. Although these types of investments can offer great returns, they are subject to large fluctuations during difficult times. That means you could see your money disappearing in a very short time.
Reasons to Invest in a Gold IRA
Diversification. In an investment portfolio putting all eggs into one basket is a big mistake. A prudent investor should include different types of investments just in case things go wrong. Gold is the asset that will diversify your investment portfolio.
Protects your investment from inflation. Inflation rates will rise to high levels thanks to endless money printing by the Fed. High inflation rates are bad news for your dollar. In a high inflation environment, your purchasing power will drop substantially.
Gold is a tangible asset.
Gold is not a chain in someone else’s liability. eg. Having your money invested in a company’s shares and the company goes bust due to illegal activities or because it took the wrong business decisions.
A gold investment protects your savings from geopolitical uncertainty. If a war breaks in the Middle East, for example, the traditional investment assets will take a downturn (stock market) but not gold and other precious metals.
Increasing demand for gold and silver for industrial use. eg gold is used in computers mobile phones and so on.
Low or negative interest rates. That means your dollar loses value every single day if it is stored at the bank.
The weak dollar is more bad news for your life savings
The stock market bubble. We are witnessing an unprecedented bubble in most assets. The stock market bubble though is the one that once it bursts it will actually cause the biggest problems in the economy because this particular bubble is a huge one.
Rotten Political and Financial System
The newly elected Biden administration is faced with an almost impossible task. First, the social and political divisions of this great country should be addressed. Then something must be done to deal with the covid19 virus and then something should be done to change the monetary system.
Most finance experts and market analysts agree that today’s fiat currency monetary system does not work. Since its introduction back in 1971 it has only created disorder and turbulence in the economies and the markets.
Unfortunately, we are faced with irresponsible individuals who do not have the political will and guts to make the right decisions for themselves and for the country. In addition, central bankers are also responsible for this, because they have seen their profits skyrocket, at the expense of you and me, and they do not want that to change.
The Abandoned Gold Standard
In 1971 President Nixon abandoned the gold standard policy. It was a move that surprised the western world. The US kept cheating the rest of the world by printing cash in order to finance the Vietnam war. There was only one way for the US to get out of this and that was to abandon the gold standard policy.
What President Nixon started in 1971 is now leading to an uncontrollable money printing bonanza. Nevertheless, money printing has been carried out in the past in most western economies. Nowadays though the money printing programs that take place right now are enormous. President Trump and the Fed carried out a gigantic 2,5 trillion money printing program. The new Biden administration is willing to add another three billion fake money to the economy.
The Europeans too agree to raise a 2,1 trillion dollars stimulus package. Their funds will be raised by selling bonds collectively. In addition, similar money printing and bond selling programs have-are been carried out by most western countries.
Financial Crisis is on the Way
All these money printing and bond selling programs mean more debt for the bond sellers and worthless money flooding for those who chose to print cash. The results from these are likely to be.
Further weakening of national currencies including the American dollar
High inflation levels
A large drop in our purchasing power
Mainstream assets (stock market, etc.) to take a large fall
Gold and other precious metals will see their value increased substantially
Mainstream IRA programs will suffer big losses
Gold IRA Benefits
You may regret if you choose a conventional IRA or 401(k) investment with a bank or brokerage firm. The stock market bubble is expected to decimate traditional investment assets. Stocks, bonds, and so on will see their prices drop substantially. That means your, life savings could perish overnight and in the end, there won’t be enough savings for you to retire.
Since most IRA accounts are invested in traditional assets, and since all these assets move downwards or upwards together, (correlated assets) there must be another asset that does the opposite.
On the other side gold is a non-correlated asset. (an asset whose value isn’t tied to larger fluctuations in the traditional market) In fact, gold always does well in times of crisis. Call it a financial crisis, recession, geopolitical tensions, war, covid-19, trade war, whatever the case is, gold not only maintains its value but also sees significant gains.
Black Monday1987Iraq-Kuwait War1990Dot Com Crash2001Financial Crisis2008Stock Market Decline-38.9-22.5-27%-34%Gold Price Results+5%+7.5%+1%+5%Gold Outperformed Stocks By Ratio45:131:129:140:1
We have seen the risks involved with a mainstream investment portfolio. Prudent investors do not put all eggs in one basket. This is applicable right now because we are facing an overvalued stock market and the effects of the uncontrollable money printing policy.
An IRA investment should be low-risk or risk-free. That’s because it is made of money that is not in abundance but your own hard-earned savings. In addition, if that money gets lost, then you will have nowhere else to turn to.
Since the IRAs are made of hard-earned money then, extra care should be taken to make sure the investment is well protected. Considering gold is a safe-haven asset during bad times, then a gold IRA will ensure that your life savings will not perish overnight in case of a financial crisis.
Should I Invest in a Gold IRA?
There is no doubt the evidence for investing in a gold IRA is overwhelming. However, when investing your life savings all care should be taken in order to avoid possible traps and mishaps.
Joe Biden, the newly elected US President is just about to face a number of issues that will be almost impossible to tackle. One of them is the financial bubble 2021.
The social and political divisions in the US cannot be cured by optimistic calls for unity. Then there is the moral duty to do something about the covid19 pandemic. In addition, sooner rather than later the President will have to deal with the effects of the largest financial bubble ever in the history of the United States of America.
When I say the largest financial bubble ever I am dead serious about it. We are currently living in the largest financial bubble because it includes almost all available assets thanks to the Federal Reserve.
Reasons Behind the Financial Bubble 2021
The Fed’s Irrational Policy
The Fed willingly encouraged investors to buy overpriced assets. Dealing with the Fed’s irrational policy will be a very difficult task. In fact, it will be of the same magnitude as the gold standard exit in the early 70s was, or dealing with the high inflation numbers in the early 80s.
It will take strong political action and a full review of the country’s monetary policy.
The ex-Fed president and now the US secretary of the treasury will not be much of a help. Mrs. Yellen walked the same path set by Allan Greenspan. Unfortunately, it wasn’t just her, all her predecessors did the same.
Alan Greenspan’s recipe during a crisis was to reduce interest rates and thus extend enormously Fed’s balance sheet.
Every time the Fed intervened to “help the economy” by just lowering interest rates, what it actually did was to set up the conditions for the current bubble and consequently the oncoming financial crisis.
Inflation Gradually Accelerates
Nonetheless, this game is now over. Inflation is slowly picking up and personal spending has risen 1,5% more than expected. Certainly, this is not much but in the middle of the covid19 pandemic that number gives us an indication that it will continue to rise.
The truth of the matter is that nobody paid any attention to these figures as everyone followed the GameStop media frenzy.
The Fed’s Money Printing
The Fed prints money nonstop. This way it finances a large chunk of the government deficit. The huge amount of money the Fed has created always finds a way to come out of the banking system. At the same time, there are extensive restrictions in the food chain, processing, manufacturing, and in-services.
Free Money is About to End
The oncoming inflation hike will force the Fed to tighten up its monetary policy. The Fed stretches out moves like that will be slow and take time. However, the markets always react before the Fed, especially in a crisis situation as fear takes over.
No matter which way you turn there are signs of a wild derailment. Most investment and market analysts see it coming, except the bankers. It is expected for most types of investments to lose money over the next years.
The Stock Market Bubble
When it comes to the index that really matters, the index that predicts real returns things do not look good. The US stock market is overpriced in fact, its value is similar to 1929, 2001, and just before the 2008 global financial crisis.
All stock market bubbles tend to keep up with fast credit expansion and the credit expansion we are seeing right now is not the exemption. Business debt compared to GDP has exploded over the last few years. One of the reasons for that was the large GDP drop.
In my mind, the stock market bubble that is on its way will be one of the worst ever. That stock market disaster will be the result of the effects of the financial bubble 2021.
In the past, when the stock market was facing difficulties investors had the opportunity to put their money in government bonds. Nowadays this is not viable. Government bonds in Europe and Japan tend to offer zero or negative interest rates. The return of the US bonds is 1,1% right now, which is poor.
It will also be a bad idea for the investor to buy private company debt. Private company debt is also not worth investing in. Their returns are at all-time historical lows. Even the high-risk bond returns have never been lower.
It looks like there will be a time when investors won’t find a place that offers decent returns to put their money.
The Fed Will Take Swift Action
When investors are about to face a financial crisis, the same goes for the Fed and the White House. The Fed’s duty will be to move carefully because nobody wants the markets to panic. If the markets should panic then, billions of dollars could be lost overnight.
Nevertheless, seeing the oncoming crisis and doing nothing to deal with it is not politically correct. Inflation has a negative impact. It affects the poor more than the rich. A development like that doesn’t do much for social justice, and the politicians will always step up and do something about it. Unfortunately, in most cases what they do doesn’t always work.
Many of you will disagree with me and there is nothing wrong with that. However, in the next few months, we are about to find out how big is the hole the Fed has created. How much it will damage the markets, the bank itself, the ordinary folk out there, and the US.
All data indicates that 2021 will be a very interesting year. The financial bubble 2021 built by the Fed will explode with huge implications for the economy and all investors.
When the world’s largest economy gets in trouble then the global economy suffers too. A US financial crisis will turn into a world financial crisis, with stock markets around the world crushing.
Most assets will suffer great losses except for gold and other precious metals. Many market analysts argue cryptocurrencies could also be a safe place to be during those times. I still think cryptos are too unstable but there is a belief that cryptos might attract funds.
Everybody knows gold is a safe haven during bad times. It always has been and it will always be. Every time there has been a crisis situation gold has been called upon to save the day and never disappointed. It always has been and it will always be.
Gold is a non-correlated asset which means when all other mainstream assets take a downturn gold tends to move the opposite way and it actually sees its value grows.
Many people in the community are now wondering whether capitalism is still a healthy system, or whether it has changed for the worst, and whether capitalism faces its biggest crisis ever.
We are living in a world that can not survive without a constant budget deficit, can not survive without cash printing, can not survive without negative interest rates, there is something extremely rotten. In fact, we are living in a world that accumulates government and public debt, a world that gives us a false sense of fulfillment by spreading around worthless currency. Well, this world is not only rotten but also disgusting! Yes, it stinks of lies, deception as well as ethical decadence.
Capitalism Faces its Biggest Crisis Ever
Why does not anyone stands up to warn the community where we are heading? Well, for the straightforward reason that no politician can tell the truth. Since if they did, they wouldn’t be chosen. The principal function of any politician is to buy or obtain votes and as a result, they can never speak the fact.
Additionally, there are so many beneficial interests with endless rewards. The money men that regulate the monetary system have all to obtain, from developing false markets, false money, and false interest rates.
The Reality Never Dies
The Roman philosopher and also statesman Seneca said: “Veritas Nunquam Perit” (The Truth Never Perishes). That could very well hold however it can be suppressed for a very long time as we are seeing now all over the world.
Let us initially think about the greatest lie which is cash. For 5,000 years, the only genuine cash has been gold (and sometimes silver). Whenever the financial system has differed from that basic principle, by creating false money, it has finished in disaster for the world, whether that has been done with silver coins full of zinc or copper or by just printing paper money.
Complete Disaster of the Currency System to Follow
Which is where we are heading currently. A tragic course of events was triggered when Nixon closed the gold window on August 15th, 1971. Ever since international debt has taken off and also all money has imploded. Financial obligation, derivatives, and unfunded liabilities have gone from workable amounts in 1971 to over $2 quadrillion today. As well as every single money has shed 97-99% in actual terms.
We are currently at the point when we will certainly not be able to change the training course of either of the two. The environment is figured out by really long cycles that humans have no impact on. Now we just have to allow it to take its course which will be devastating for the whole world.
So why is nobody seeing what is taking place and why is nobody taking on the claim that the Emperor is completely naked?
The truth is unpleasant and painful yet it does never die.
It is an indisputable reality that essentially all the fiat cash that is printed by federal governments, central banks as well as commercial banks is pointless as well as for that reason incorrect.
If a federal government prints cash out of nothing to cover deficit spending, that cash has NO worth given since all the jobs needed to develop it was to push a button on a computer system.
We likewise recognize that the money has no worth because no financial institution or central financial institution is prepared to pay interest in deposit accounts. Instead, because cash is worthless, these bankers desire to be paid to hold the money. There is no reason to pay interest in worthless money.
There is an Abundance of Worthless Money
As well as when a financial institution receives a $1,000 down payment and after that lends out that very same cash 10 times or even more, that cash is likewise worthless, considering that it has set you back $0 to provide the funding.
It is the same with a credit card company, or car funding, they all concern counterfeit money developed by the touch of a switch.
For the ones who don’t recognize what this implies, let me describe it. Allow us to begin with the bubble’s possession. When the worldwide stock, property, and also various other bubble asset markets stand out, all these properties will certainly lose a minimum of 95% of their value in actual terms. The best way to calculate real terms is certainly gold because that is the only cash that has actually survived and also preserved its purchasing power for hundreds of years.
And also, if we take a look at the financial obligation bubble, global financial debt goes to the very least $270 trillion. Yet when the financial obligation bubble stands out, so will other liabilities like the $1.5 quadrillion of derivatives. So when the financial obligation bubble pops, basically all that fiat money ends up being entirely useless. No person can repay it as well as no one wants to acquire it.
I recognize that the above two paragraphs are an extremely streamlined description of what will certainly take place over the coming years. However, this is the ugly truth.
These occasions will undoubtedly not take place in one go. They will certainly most probably begin with the securities market very first collapsing, which will certainly put pressure on credit score markets. A lot more QE will certainly adhere to yet that will just have a short-term impact. Even more collisions, even more, cash printing, the rising cost of living, devaluation, credit report defaults, company closures, and also bank defaults.
We had the first clear signals from numerous significant reserve banks, that something was rotten in the worldwide monetary system already in August, when the Fed, ECB, and BOJ all proclaimed that they would do what it requires to sustain the system.
Quantitative Easing and Money Printing the Same
In September the Fed launched overnight Repos of $75 billion boosts to $100 billion. They additionally took on two-week Repos of $ 30 billion rising to $60 billion. Adhering to that the Fed has now announced that they will certainly start QE of $60 billion each month. We should not call it QE according to the Fed. So allow us just call it money printing since that is what it is.
The President of the Minneapolis Fed stated: “This is not about changing the stance of monetary policy. This is about making sure markets are functioning. This is kind of just a plumbing issue.” He is right, it is a plumbing concern. However, the issue is that the economic system is leaking like a filter without the possibility of connecting all the openings.
Between the end of 2017 and also 2019 the Fed reduced its balance sheet by $700 billion from $4.5 trillion to $3.8 trillion. As always, the Fed has no idea whatsoever. The issue is that the system will not make it through with even more cash printing either.
Central Banks Introduced Unprecedented Economic Stimulus
The world’s largest central banks had no other option to fight the covid-19 caused crisis than to introduce further economic stimulus amounting to trillions of dollars. It was the Fed and the US government first with the ECB-European commission next, and all the other major western economies and central banks to follow.
Yes, the system is rotten and is currently starting to smell. The activities by the central banks specifically in the last couple of weeks smells of panic. The problem with JP Morgan or Financial Institution of America, the ECB, or possibly the Fed is supporting the bankrupt Deutsche Financial institution? We will most likely quickly learn where the greatest stress is.
On top of the bank issues, the company’s financial debt is obtaining riskier day by day. The financing of firms like We Work and Merlin, are clear indications of just how hazardous this market has ended up being.
Central banks are already trying to deal with the fires, most people are not aware these fires exist. There is a concern whether the central banks will be able to contain these fires or whether they will spread like wildfires.
The Decadence Started in 1971
US financial debt back in 1971 was $400 billion versus $26 trillion today, a “plain” 55x boost. US GDP was $1.2 trillion in 1971 versus $26 trillion today. A 55x boost in US financial debt in the last 48 years has just generated a 17x boost in GDP.
The US economy is in trouble which is not surprising because never-ending money printing of pointless paper money, can not create real growth and wealth whatsoever. Its only effect on the economy is to create the stock market bubble.
It is not just the US that is in this setting. Since taking away the gold support of the dollar in 1971, offered all countries an incentive to print money and increase credit.
The UK Example
I do keep in mind the beginning of the damage of money. Moving later on to the UK, I saw the pound collapsed against the Swiss Franc from CHF 10 in 1972 to Swiss Franc or CHF 1.20 today, an 88% loss of the extra pound.
A period of economic mismanagement and political turmoil in the UK in the 1970s started it all. The annual rising cost of living was 15-17% for 7 years and interest rates got to over 20%.
The economic system was moments from breaking down in 2008 throughout the Great Financial Dilemma. Eleven years later on, worldwide financial debt has doubled and danger has increased greatly.
Central lenders are conscious that the global economic situation is currently standing at a crossroads. The course was laid by them many decades back and now there is no way back.
The US and the Gold Standard
August 2020 remains in many ways comparable to August 1971. America was at that time behind-the-scenes. The country was under pressure after the costly Vietnam battle, as well as the gold standard, which stopped the United States from cheating the system by printing cash. The remainder of the world saw the US’s precarious situation as well as began marketing bucks. To recover their position, Nixon saw no other way than to take the buck off the gold standard, and this was the start of 50 years of global cash printing, and also credit score growth on a humongous scale.
Nixon’s August 1971 choice has brought about a dilemma of extraordinary proportions. Still, most people can see that we are currently at the point of “a final and also total catastrophe of the currency system included” as von Mises stated.
This August is not one solitary event like in 1971 yet a variety of very clear indicators that all reserve banks are worrying about. Every major reserve bank is currently revealing a level of concern that is extraordinary. They are all telling us that there will certainly be unrestricted money publishing incorporated with no or negative interest rates. This will certainly not clear up half a century of reckless monetary mismanagement.
What Nixon started will now be finished off by current governments as well as main lenders in the most magnificent money printing bonanza, leading to hyperinflation as well as a collapse of the economic system.
Until now, over 40% of worldwide bonds currently generate less than 1% and over $16 trillion well worth of bonds have an unfavorable interest or negative interest.
Negative Interest Policy is Insane
A negative rate of interest prices is of course complete insanity. It will certainly come to be also much more intriguing when home loan rates go to minus 25% so after a few years the financial obligation has been paid by the financial institution!
Us Rates to Decline Unless
95% of international bonds are now listed below the Federal Finances price. Since that rate is 2.5%, this is a short-lived scenario. US rates are likely to decline dramatically throughout the autumn to absolutely nothing unless the devastating results of the neverending money printing start to take place. That will cause a lower dollar and greater gold. US stocks will certainly decrease despite lower prices.
Lower rates are no longer seen by securities market financiers as helpful for markets as a sign of financial difficulty in advance.
Powel Trump and the US-China trade war
Fed Chief Powell simply stated that the “Economy is in a beneficial area”. You ask yourself where that area is, considering that there is nothing good regarding the United States economic climate currently. As well as it appears that Powell doesn’t think his very own words given that in the same breath he claims that there are “substantial threats”.
So the Tit for Tat video game between the US and also China proceeds and what is specific is that everybody is a loser in a trade battle. Trump won’t give in and neither will China. As they play their video games, the global economy will certainly suffer and so will a breakable global economic situation. Global trade is currently down and I am afraid things could get worse in the autumn.
Trump is most likely to win this video game over Powell. Trump has stated that rates need to drop by 1% now. Hence, we are assured to see a lot lower US rates and a rapidly falling buck throughout the fall.
Investors set to Suffer Big Losses
Regretfully 99% of investors will not understand that they need to be out of stocks and move into gold, till their wealth has been wiped out. All stock investors will believe that central banks will certainly support them once more. But as I have described over, this time support will certainly fall short as we begin a secular bear market in stocks, and the global economic crisis will last a very long time as well as lead to massive wide range destruction.
That the global economic situation for the last 100 years was reliant on credit scores as well as printed cash, is not a new miracle paradigm but a sign of a diseased system. The never-ending credit and the constant printing of worthless money are about to end. In a corrupt way, it is virtually paradoxical that the trigger for finishing this sick financial system would certainly be a pandemic disease.
Social Discontent and Anger to Come
Currently, the world remains in a situation when all of those aspects will possibly come to pass. We already have the recession and also we have a condition. There is no significant famine yet however, this is most likely to come. Social discontent and conflict are possible repercussions of these troubles. Starving and angry people will stand against their leaders as well as against the elite. The differences in income, as well as the huge gap that separates the wealthy and the poor, have created an illogical scenario. This is basically without exception just how every change starts.
There is a lot of anger in the community. People aren’t happy at all. They are wondering what on earth is going on with their taxes, they are wondering why the money they earn is never enough, they are wondering why social inequalities have increased, they are wondering where all this abundance of (fake) money is going, and so on.
The Money that does not Exist
Central banks and governments are currently printing limitless amounts of cash to help small and also big organizations as well as individuals. It is a program terrific in that every person gets aid, but no one asks where is the money coming from.
No one stresses that THERE IS NO CASH. The $ 100s of billions as well as trillions that are being provided to the needy do not exist. They are just produced out of thin air. Because the situation started in the very early autumn of 2019 with the Repos, the Fed’s balance sheet has increased by practically $3 trillion to $6.5 T. Yet this is just the start. The forecast is that it will get to $9T in June as well as possibly $12T a couple of months later on.
What we have to keep in mind is that this situation did not start now however, in 2006 when the Fed’s annual report was $800K. By 2012 it had gone to $3T. In the following few months, the equilibrium sheet will certainly blow up by 3-4x to $12T.
In the present year, the US can quickly get to a shortage in unwanted of $4T, taking the financial debt to $28T. If we just go back 3 months, who would certainly have thought a Fed equilibrium sheet reaching $12T as well as a US financial obligation of $28T? They don’t even do that because if they had, they would have known that the United States financial debt has doubled every 8 years because of 1981.
The United States is likely to have a debt of $40T in 2025 however, that number is most possibly a low number. Then we are going to see failings not simply in the economy but also in the financial system. That is the danger the economic system is currently facing as well, as we are currently in a stage when the surprises will be much even worse than anybody can think of.
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Back to the Future
It all began with private lenders taking control of the financial system in 1913 when they established the Fed for their very own benefit. For practically 60 years their power grew slowly however, then in 1971 when Nixon closed the gold window, all hell broke shed.
The United States currently begun what is currently 60 years of shortage investing. Every solitary year given that 1960, the United States is running at a loss. (deficit)
Because the main purpose of political leaders is to purchase votes, Nixon had no choice back in 1971. The United States had currently at that point been running a shortage for ten years. With a gold standard, it is necessary to run a sincere economic system without deficits. Or else you lose all your gold as well as the currency breaks down. Given that Nixon had no intent to run excess, he might not be connected by a gold requirement and also consequently abolished the gold backing of the dollar. The consequences were of course tragic as well as the dollar has actually fallen since.
Back then $33 could buy you an ounce of gold nowadays you need well over $1900. This is how much the dollar has depreciated.
Considering that the US began running deficits 60 years ago, total United States debt has actually gone from $800 billion to $26 trillion today. What we are seeing is a fantasy world all built on financial debt, federal, state, customer, home mortgage, car, trainee, and so on. The checklist is limitless just how to produce phony wealth simply based on the financial obligation.
The US is currently coming back to reality which will certainly be the biggest shock. The trillions of fake cash and fake assets will now implode and also so will certainly the US economy.
What the world has experienced in the last 100 years is fake capitalism. It more looks like Voodoo capitalism. Central bankers, led by the Fed, have successfully taken on Mayer Amschel Rothschild’s philosophy: “Permit me to issue and control the money of a nation, and I care not who makes its laws.”
By doing this, they have placed a spell on the international economic system as well as lumbering it with debt that might never be paid back. They are instrumental in developing a debt-plagued world economic situation as well as then they are the only ones who can come to the rescue and “save” it.
A debt-burdened world can never be saved by even more financial debt. Next, we will certainly see limitless cash printing that squashes money as well as leads to depressionary run-away inflation.
Inflation is on the Way
The reckless money printing by the Fed is expected to bring an inflation crisis. Analysts are convinced that unprecedented money printing could increase inflation substantially. That means your cash will lose value. For example, if you are planning to take a holiday to an exotic location with your retirement savings, chances are that you will not be able to afford it. You could probably end up at a cheap resort nearby.
Business Collapse and Unemployment.
Market bulls argue the market is already recovering. Shops are opening, factories are back in business, restaurants are opening too, stocks are holding up, and so on.
They are wrong. Unfortunately, unemployment levels are massive and still growing. Several airlines already declared bankruptcy. Some of them are Avianca from Colombia, Virgin Australia, Trans States airlines from the US, Compass airlines also from the US, and many others. Rolls Royce announced 9000 job losses in the UK, Nissan shuts down its Barcelona plant in Spain with 3000 redundancies, and another 25000 jobs indirectly threatened.
In the US the news is not good either. The country has lost 20,6 million jobs since mid-March, resulting in an unemployment rate of 14,7% a level not seen since the great depression in the 1930s. I am afraid, there will be more business collapse and more unemployed in the following months.
The recession is going to be bigger than the 2008 recession. It will take years for the world economy to recover not months or weeks. The numbers are already massive and still growing. As I just said, the economy is not going to be back to where it was within a year that’s for sure. So why is the stock market still high? What is that’s still driving equity prices? It is the Fed’s liquidity.
Stocks and Bonds set to Collapse
In genuine terms, all bubble possessions will now collapse. Actual terms indicate secure acquiring power and evaluate against gold. We will see supplies, bonds, and also residential or commercial property decline by 90-100% against gold. In nominal terms, stocks may go up at first with hyperinflation. That will just be imaginary gains.
Supplies worldwide dropped initially by around 40% and also have currently recouped half of that loss as stock capitalists have been buying the dips in the hope that central banks will certainly save them yet afterward. Yet they will certainly quickly have their next shock. Markets might begin their next leg down already in the coming week. Or it could take 2-3 weeks. What is clear is that a profane bearish market has begun which has a very long way to go.
Gold is Still Undervalued
For twenty years I have discussed the value of riches conservation in the form of physical gold. Throughout that time gold is up 6-7 times depending on which currency you rate it with. Still, much less than 0.5% of world economic possessions are in gold.
Gold is still exceptionally undervalued regarding the growth of the international cash supply. It is still possible to obtain gold, yet the physical market is under real pressure.
This is an outrageous circumstance that will not last long. Both the Comex and the LBMA are under huge pressure which quickly will lead to substantial distribution problems and also a significant cost squeeze. The home window of opportunity to acquire physical gold at current costs will soon close.
Keep in mind that gold is actual physical wealth in addition to an insurance policy against a monetary system that is unlikely to make it through. Gold can still be bought with miscalculated fiat cash at prices significantly below its genuine value, however, not for too long.
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Although, the sovereign gold coin has been around for at least 500 years, investing in gold sovereigns is still popular, especially in Europe.
The sovereign is a gold coin of the United Kingdom with a nominal value of one pound sterling. Prior to 1932, it was a fully circulating coin with Britain’s then Gold Standard currency. Today, it is used as a bullion coin and is sometimes mounted in jewelry. So what are the characteristics of the British gold sovereign, that can attract investors to actually go ahead and invest in gold sovereigns?
To protect and preserve wealth from unexpected events.
Gold is a hedge when the stock market is not expected to do well.
The weak dollar
The loss of confidence in central banks
Geopolitical uncertainty (Middle East, Brexit, ISIS, North Korea, Hong Kong.)
The US-China trade war.
The covid-19 triggered financial crisis
The first British gold sovereigns were minted more than 500 years ago. They were minted under King Henry VII in 1489. In 1816, the British Gold Sovereign as we know it today was first introduced, and as the British Empire expanded under Queen Victoriaduring the 1800s, this coin came to be the world’s most widely distributed gold coin. The design of Saint George astride his brave steed, slaying the dragon, is common to the reverse of all variations of the coin.
It is estimated that only 1% of all gold sovereigns that have ever been minted are still in collectible condition. It is this relative rarity in relation to bullion coins and bars that leads to leverage whereby, in gold bull markets the value of these coins increases by more than the actual price of gold.
Unlike paper investments or speculations, British sovereigns are a real and permanent tangible value. Therefore, they offer two ways to build wealth. They can offer the best of bullion and numismatics in one investment. They contain the intrinsic security of bullion or precious metal in a pure form and can also offer additional profit potential, due to their aesthetic and historical appeal.
The American eagle bullion coin is one of the most popular gold coins in the world. Investors buy American eagle gold coins with no questions asked. This is due to the trust the US mint and government have earned over the years. In addition, the American eagle gold coin is one of the few gold coins approved by the IRS for an IRA account.
American eagle bullion coins are produced by the US mint. Gold collectors and investors appreciate the rarity and value of the American gold Eagle. These coins were first introduced in 1986 and are still been produced today. Depending on the weight, and rarity of the coin in question, gold eagles can be purchased for reasonable premiums over the market price of gold. In this post, we will analyze the American eagle bullion coins and the reasons for an investor to go ahead and actually invest in American eagle bullion coins.
To protect and preserve wealth from unexpected events.
Gold is a hedge when the stock market is not expected to do well.
The weak dollar
The loss of confidence in central banks
Geopolitical uncertainty (Middle East, Brexit, ISIS, North Korea, Hong Kong.)
The US-China trade war.
The covid-19 triggered financial crisis
The design of the American Gold Eagle is one of the most easily identifiable in the world. The obverse of the coin features the image of Lady Liberty depicted with flowing hair, a torch in her right hand, an olive branch in her left, and the US capitol building in the left background. The reverse of the coin depicts a male eagle with an olive branch in his Talos flying over a female eagle and her hatchlings in their nest.
American eagle gold coins are guaranteed by the American government. In particular the US government guarantees, their gold weight, purity, and content. In addition, the American eagle gold bullion coins are legally eligible for precious metals IRAs. (Individual Retirement Accounts) These accounts are tax-free growth or tax-deferred which means that you pay no tax upfront and can start saving right away. If you are interested you might as well have a word with your financial advisor about this.
Furthermore, the American eagle bullion coins are also one of the most widely traded bullion coins in America, typically affording investors narrow spreads between buying and selling prices.
Money periodically lost its value and became cheaper hundreds and thousands of times. This happened in many countries, across different continents. I have compiled the most revealing examples of devaluation of national currencies over five decades.
1967-1968. A crisis in Peru
Peru’s state budget was seriously depleted during the second half of the 1960s. The country’s gold reserve experienced a threefold decrease. Sharp inflation plunged the country into a crisis. Following the military coup, the incumbent president of the state was dismissed and replaced by another one. The Cabinet of Ministers changed four times over six months. However, it was impossible to overcome the crisis in the country.
In the photo: A mass demonstration in Peru. Citizens of Lima took to the streets to express dissatisfaction with the policy of the authorities.
The prices of products and basic necessities increased, the number of poor and unemployed in the country grew by 22%. Due to inflation, the devaluation of the Peruvian sol was 45%.
CONCLUSION: Against the backdrop of economic problems and the fall of the national currency, the price of the precious yellow metal has risen. The average price of a troy ounce of gold in 1967 was $35, and in 1968 — $ 38.
1970-1971. The decline in the quality of life in Argentina
In the 70s, Argentina was hit by the financial crisis. The price level doubled every two to three months. The government decided to save the situation and introduced a new national currency. The old peso was exchanged for a new “legal peso” at the rate of 100:1.
The crisis in the economy was accompanied by all the classic symptoms of the Lack of Financial Security virus: unemployment, a decline of living standards and strikes.
CONCLUSION: The old peso savings of Argentine residents have been decreased many times. The economic crisis affected the price of the precious yellow metal: in 1971, the price of gold increased to $43 per troy ounce.
In the photo: participants of the street rally in Córdoba, Argentina.
1975 year. The military coup in Chile
Since the early 70’s, the government of Chile printed a huge amount of paper money – escudo, to plug the gap in the country’s budget. Besides that, the government decided to take food prices under control. Strict measures had a negative impact on the economy. There was a shortage of food products. Prices have multiplied. In just 2 years, inflation increased sharply from 22% to 353%. Prices for copper decreased, the devaluation of the dollar impacted the national currency. Strikes and mass demonstrations have become more frequent. In 1973, the military coup happened in Chile.
In the photo: In 1975, after 15 years of using the escudo currency, Chile issued a new currency – peso.
One could exchange 5000 escudos for 5 new pesos.
As a result of the anti-crisis measures of the military government, inflation began to decline.
CONCLUSION: At a time when the national currency of Chile depreciated, gold became more expensive. In 1975, the price of gold was $139 per troy ounce.
On the chart: changes of the price of gold per troy ounce, starting from 1975 to 1979.
1979-1980. The collapse of the national currency in Israel and Vietnam
Inflation in Vietnam began to increase since 1975. Money began to depreciate. The Government of the Socialist Republic banned the free sale of gold, therefore, the “black market” of gold was on the rise in the country.
The state of the united Vietnam abolished the monetary unit of dong. The replacement of the old dong with the new one was made at a rate of 500:1. The exchange limit of 100,000 was set for each family. By the end of the 1970s, hyperinflation in the country had reached three-figure numbers.
In the photo: 500 old dongs of South Vietnam and 100 new dongs of the Vietnam in the 1980s.
Israel also experienced difficult times. The authorities tried to improve the situation and restore trust in the national currency. In a short time, three heads of state were replaced. In 1979, for the first time in the history of the country, inflation exceeded 110%.
In 1980, instead of a depreciating lira, a new monetary unit was introduced — shekel.
CONCLUSION: Due to the difficult economic situation in the world, the demand for gold sharply increased. In 1980, the price of the precious yellow metal reached $706 per troy ounce. The average price per year was $594.
1998. The fall of the Russian ruble
Since 1993, Russia was hit by inflation, which was followed by a default in 1998. Over 5 years, the price of some products and services increased by 100% or even more. The prices were in millions of rubles. Banks stopped giving cash to depositors. The market was empty. The workers received their salary in the form of food.
In the photo: the queue of the Russian depositors to the bank, August 1998.
CONCLUSION: Many people who had money on bank accounts lost their savings. Against the backdrop of instability in the world, the price of the precious yellow metal has increased. In 1997-1998, the average price of gold per troy ounce increased to $291.
On the chart: changes of the price of gold per troy ounce, starting from 1968 to 2000.
2001. Devaluation in Belarus, Ecuador and Turkey
Inflation in Belarus has progressed from the mid-nineties to the early 2000s. The Belarusian ruble has fallen in price so much that the government had to introduce a new national currency. Old Belarusian rubles were replaced by new ones at the rate of 2000: 1.
In 1998, following the decrease of oil prices, Ecuador was hit by the financial crisis. The government of the country declared a default on external debts. The Ecuadorian sucre depreciated 4 times. 70% of the population were below the poverty line. This caused a storm of protests and unrest.
The government tried to fix the situation and pegged the sucre to the US dollar at a rate of 25,000: 1. But such measures did not help. Since 2000, the state has finally transferred the country’s financial system to the US currency. Since 2001, Ecuador has no national currency.
In the photo: The purchase of US dollars from an “illegal dealer” in Quito, Ecuador.
Turkey experienced severe inflation throughout the 90s. From 1995 to 2000, the lira depreciated 20 times. In 2005, the government introduced a new monetary unit. The exchange rate of the new Turkish lira for the old one is 1 000 000: 1.
In the photo: The denomination of 20 million Turkish lira was exchanged for 20 new liras.
CONCLUSION: The above listed examples illustrate the depreciation of paper money. Against the backdrop of inflation, gold rises in price. In 2001, the price of the yellow metal was $276 per troy ounce, in 2005 — $513.
2008-2009. Hyperinflation in Zimbabwe
During the mid-2000’s, the financial crisis in this South African country reached alarming proportions. This happened as a result of the state land property redistribution. Prices doubled every half hour.
The Zimbabwean dollar was cheaper than the paper on which it was printed. In 2009, the authorities ceased to issue their own currency and began to use the monetary units of neighbouring countries.
In the photo: A citizen of Zimbabwe exchanges a trolley full of banknotes for 1 US dollar.
CONCLUSION: Inflation in Zimbabwe has deprived the population of savings kept in the national currency. Gold continued to grow. In 2008, the annual average price of a troy ounce was $869, and in 2009 — the precious metal was worth $1087 per ounce.
2018 year. Paper money has been losing ground
The depreciation process of national currencies in some countries of South and Central America, Eastern Europe and Asia continues. The devaluation of the Bolivar occurred in Venezuela. Iranian rial fell in price. The Russian ruble survived the downfall, and the Turkish lira became cheaper.
Meanwhile, the price of the troy ounce of gold remained high – $ 1,192.
On the chart: price change (in US dollars) per troy ounce of gold, starting from 1968 to 2018.
It should be noted that during a short interval the precious yellow metal could slightly decrease in price. But this wasn’t so dramatic and not as traumatic as the devaluation of the paper currency.
Gold has demonstrated a significant price increase over 50 years.
In times of political and economic crises, owners, as a rule, lost their savings kept in paper money. Gold, on the contrary, was in demand and rose in price.
The precious yellow metal remains stable at all times. It serves as a protection tool for people and their savings over hundreds of years. Gold does not depreciate as opposed to money.