Why Gold? Why Now?

Responsible adults work for many years, and expect to be rewarded for their efforts. Like squirrels gathering nuts for the winter, we understand the wisdom of storing possessions for the future, when conditions may be less favorable for production. Rather than accepting nuts as payment, we humans accept things that represent a store of value. This includes property, money, commodities, or a promise of future services.
In earlier times, people swapped services with each other. It was often challenging to determine the exact value of one’s services when compared with another’s. A “medium of exchange” was needed– a “currency.” To be trustworthy, a currency must provide intrinsic qualities such as durability, limited supply, easy recognition, and acceptance by the masses. Long before the days of the Roman Empire, gold and silver were known to meet all of these requirements. Thus they became known as “precious metals.”
Government bodies soon issued their own currencies as a way to establish their importance in the world order. They initially issued coins made of gold or silver because of the intrinsic value of such coins. After awhile, however, people and governments Efinancialcareers News who managed to accumulate significant wealth, found it difficult to store or haul around large quantities of these heavy currencies. Governments quickly realized the expediency of storing quantities of gold and silver in secure, guarded vaults.
These same governments then issued paper “certificates” that guaranteed –upon demand by the bearer–the exchange of certificates for a predetermined quantity of gold or silver. These were known as “demand” notes or certificates. This system worked quite well because the issuing authority was required by law to hold an equivalent quantity of gold or silver.
Guardians of these storage vaults -government agencies, the Federal Reserve, or central banks-soon discovered that people rarely demanded gold or silver in exchange for their certificates.
Unfortunately, government officials quickly discover the ease of dipping into a “bucket” of communal money (also known as tax revenue) whenever they want something. So, why would an “elected official” ever refuse any political request or personal desire? These so-called guardians of our wealth soon figured out how easy it was to print demand certificates even when their vaults didn’t hold an equivalent amount of physical gold or silver. So they did. First, perhaps 10% more than they possessed, and then more and more. In time, existing governments worldwide-including our own-abandoned all requirements for backing demand certificates with gold or silver. Such currencies are called “fiat” currencies.
A 2010 Business Dictionary Definition states: “Fiat currency is a common type of currency issued by official order, and whose value is based on the issuing authority’s guarantee to pay the stated (face) amount on demand, and not on any intrinsic worth or extrinsic backing. All national currencies in circulation today, issued and managed by the respective central banks, are fiat currencies.”
With government spending at record levels-in the U.S. and worldwide–indebtedness increases quarterly by trillions of dollars. Our ability diminishes daily to repay our debts with anything of substance. This scenario sets the stage for hyperinflation, wherein the purchasing power of our fiat currency plummets similar to the German Mark in the Weimar Republic of the 1920s.
Hyperinflation may be planned and carefully carried out when a government realizes that it has borrowed and spent more than it can ever repay. Policymakers prefer to repay their debts with items of less value than what they’ve borrowed. If an individual does this, we call it cheating and stealing. Governments call it quantitative easing, debt restructuring, or sound fiscal policy.
The value of our U.S. dollar is diminishing almost by the hour. History tells us that knowledgeable people always search for a dependable store of value. Gold and silver have served as dependable stores of value since before the Roman Empire.
One way our government can keep us from protecting ourselves is to declare it illegal to own gold or silver. Do you think this idea absurd? In April, 1933, our U.S. government– under President Franklin D Roosevelt–banned the ownership of gold. Our government confiscated nearly all gold owned by its own citizens.
President Ronald Regan once said that the nine most terrifying words in the Business Finance Degree English language are, “I’m from the government and I’m here to help.”
Barring another desperate attempt by our elected officials to prevent our shielding ourselves against the consequences of their spending, the value of gold and silver–in relation to all fiat currencies–will almost certainly rise in the foreseeable future. Perhaps dramatically so.
We have been blessed in the United States with the most stable government in the history of the world. It may be prudent now to also place a portion of your faith and your family’s financial future in gold.

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