Nov
15
Buying Gold Will Hedge Against Inflation
November 15, 2009 | Leave a Comment
Gold is the money people turn to in times of inflation and economic turmoil. Gold is a means of hedging against inflation. If you are thinking at this moment that gold is not money, but rather a yellow metallic decoration that people adorn themselves with, then you are incorrect.
Gold has been money for over 6,000 years. Gold and silver were the first forms of real money that met the requirements of sound money. Plato and Aristotle spoke of sound money to be
1. The ability to be durable. It must stand the test of time and not wither.
2. The ability to be portable. Good money needs to hold value in a small space.
3. The ability to be divisible. Real money should have the ability to be divided evenly and still hold its value. Also known as fungibility. Diamnonds are not fungible because each diamond has it’s own value.
4. It must hold a rare value or quality.
Those four requirments are important because Plato and Aristotle knew something that most people today are not aware of. Our paper dollar, and all paper money for that matter, do not meet any of the requirements of sound money.
Paper is paper. It can be made on the spot and printed at will. Paper is neither rare or durable. The trust that we put into paper is the only thing giving it value at this point.
A piece of paper with inked stamped all over it is essentially what our dollar is. That’s it. If someone told you they would give you a sheet of paper for a pack of gum, it is equivalent to what our dollar is. There is no difference between the two, and that is where many get confused.
If someone gave you some oil, copper, silver, or gold in exchange for a pack of gum, then the transaction makes sense. Those are real assets. Someone’s hard work and time went into producing those assets, so they hold a real value.
Our money becomes more worthless each day our government prints more money. A dollar crisis is happening right now, and most don’t know it. Gold and silver were the first real established currencies that stood the test of time. This is because gold cannot be printed at will.
Mining companies must do lots of drilling and surveying before actually bringing a mine online. This takes precious time and resources. Using paper money as currency is a historically recent thing. There have been hundreds of fiat paper currencies in history and all of them have failed.
Gold and silver coins have proven throughout history to hold their value and hedge against inflation. While fiat paper currencies plummet, gold will continue going to the moon.
Gold is in the middle of a 20 year bull market, and the dollar will continue to plummet. The most recent gold high is around $1,100/ounce. Inflation means that people will flock to gold. Why do they do this? Gold cannot be printed or inflated. What does that even mean?
Pretend you are inflating a balloon. The balloon gets so big that it sometimes bursts. Our government is inflating our dollars in much the same way. Our government is putting massive amounts of money into circulation. When you have more and more dollars chasing the same level of goods, you have inflation.
Inflation does not mean higher prices, it simply means printing more money. Higher prices are the result of printing more money. So, get out of dollar related assets now before you lose out big time.
You should only be invested in gold bullion, silver bullion, gold coins, silver coins, and mining stocks over the next few years at least. India, China, Arab states, and several other countries are dumping dollars and buying gold. You decide if it’s time to get invested in gold and silver.
God bless.
Check out my website to learn more about how to buy gold.
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