Gold And Silver Excellent Store Of Wealth In Last 60 Years

We are told that money is safe. Likewise, our bank is a trusted partner, so is the bank account where you hold your savings. While that could be true in normal circumstances, during times of stress nothing is further from the truth. Gold and silver in physical form outside the banking system are the ultimate stores of value.

But readers of this site knew that for a long time. What is a much more interesting question, though, is how gold and silver preserve wealth over a long period of time. Consider, for instance, the last several decades … to which extent have the metals proven their “unique selling proposition” (to use some marketing jargon)? And how does this relate to the price change in a basket of goods that people are using in their daily lives? Or how does it compare to other regular investment alternatives? This article, written by contributor Gary Christenson, provides answers to those questions. The author looks back 60 years and comes with a very insightful set of findings.

2014 is the 60th anniversary of nothing special.  A quick review and comparison to 1954 seems appropriate.

  • In 1954 the Military-Industrial Complex was fighting a cold war with the USSR.  Now they are fighting with Russia.
  • In 1954 the President of the United States played golf regularly.  No change here.
  • In 1954 due to the paranoia and power-politics of Senator Joseph McCarthy and others, it seemed that “there was a communist under every bed.”  Now it is terrorists that captivate the national paranoia.
  • In 1954 there was a great deal of unrest in the Middle East.  In 2014 there is a great deal of unrest in the Middle East.
  • In 1954 the world powers were intimidating the smaller countries to advance their agenda.  No change since then.
  • In 1954 the United States appeared to have the “moral high ground.”  That “moral high ground” has slipped away.
  • In 1954 there were no Americans on Food Stamps.  In 2014 there are almost 50,000,000 Americans who receive free food under the SNAP program.

Some approximate numbers

60Years_gold_silver_other_prices

Summary

The value of the dollar has declined over 60 years so prices for most items have increased.  Gold and Silver are still a store of value.  Politics and government are … well, the same as always.

For the Future

1)   Politicians will borrow and spend, the national debt will increase, and more promises will be forthcoming.

2)   Deflation is a problem for the industries and governments that depend upon ever increasing prices and ever increasing debt.  There are few in power that would benefit from deflation.  Expect inflation.

3)   The Federal Reserve is committed to “printing dollars,” increasing debt, expanding the money supply, and creating inflation.  Expect the Fed to succeed. 

4)   The gold and silver bears will be disappointed.  Both precious metals will go much higher as all currencies weaken.

5)   A financial crash will demonstrate that debt based paper assets can plummet in value.  Gold will increasingly be seen as a store of value.

6)   Even without a crash, continued inflation in the money supply will demonstrate that debt based fiat currencies are not a store of value.

7)   A hot war in the Middle East, Asia, or Eastern Europe will be expensive.  Remember the Vietnam War.  The consequences will include more debt, more inflation, and higher prices.  Gold prices rose by over a factor of 20 between 1970 and 1980.  The cost of living increased substantially during that same decade.  It could happen again.

8)   Even a cold war or a currency war will be expensive, but less so than a hot war.  The consequences of either a hot or cold war will be similar.

9)   From Milton Friedman:  “Only government can take perfectly good paper, cover it with perfectly good ink and make the combination worthless.”

Delusions die hard!  The delusions regarding the value of paper currency, usefulness of the Fed, government entitlements, the welfare and warfare state, and continual growth are weakening.  The ultimate reckoning may be sudden or slow, but it will not be pretty for the unprepared.

Gold and silver will remain valuable and a store of value over the next 60 years.

 

GE Christenson  |  The Deviant Investor

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