Principles of Wealth #25*

“Hard money” advocates and precious metals dealers contend that gold is not only the safest way to store wealth but also a very good way to grow wealth. The truth is, gold is a valid way to protect wealth from certain unlikely economic situations – but for the ordinary wealth builder, owning lots of gold is both risky and unwise.

There is a school of economic theory that puts gold above all other asset classes.

Here’s the argument:

* Stocks can go up but they can also go down. The same can be said for real estate, commodities, and bonds. But over the long haul, gold will preserve an investor’s wealth because of its intrinsic value.

* President Nixon made a huge mistake in 1971 when he took the dollar off the gold standard. When the dollar was tied to US gold reserves, the government could not print more dollars than there was gold to back them up. Now, the government had the freedom to print as many dollars as it wanted, backing them up with Treasury bonds (promises to repay the debt sometime in the future).

* When nothing can stop the printing of dollars, politicians will print them in an effort to speed up economic growth. But as the number of US dollars in circulation increases, the value of the individual dollar goes down. This causes inflation spikes that make virtually every asset other than gold – stocks, real estate, commodities, and bonds – worth less.

* In 1970, before Nixon’s decree, an ounce of gold could be bought for about $35. In 2019, that same ounce of gold would cost about $1,290. Meanwhile, as US debt has skyrocketed, the risk of a massive economic collapse has become more and more likely. Any day now, we could see banks freezing assets, the stock market crashing, bondholders losing everything, and “blood in the streets.” Gold will then be the only currency that anyone will accept. And here’s the silver (gold) lining: When that happens, the value of an ounce of gold will soar to $5,000 and even $10,000. Investors that own gold will become the new rich.

So… is that likely? That’s the million-dollar question.   READ MORE

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Today’s Word: fatuity (noun) – Fatuity (fuh-TOO-ih-tee) is complacent stupidity; smug foolishness. As used by Helen Keller in The World I Live In: “The fatuity of their union was evident to them, and they parted.”

Did You Know?: Nearly all of the gold on Earth came from meteorites that bombarded the planet over 200 million years after it formed.

Worth Quoting: “Praise, like gold and diamonds, owes its value only to its scarcity.” – Samuel Johnson

What I’m Reading: Maurice O’Sullivan was born in 1904 on Great Blasket – a remote island off the Atlantic coast of Ireland that was abandoned in the 1950s. In Twenty Years A-Growing (translated from the Irish), he tells the story of his youth, first in the coastal city of Dingle and then on the island… a way of life that is now in the past.

Very charming, clever, involving. Reminds me of Mark Twain at times.

Watch This: There is hope. Happiness is possible and contagious.


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