| "Deficit spending is simply a scheme for the 'hidden' | | | | money for gold or silver. (Private citizens lost that right |
| confiscation of wealth. Gold stands in the way of this | | | | in 1933. After that time, only foreign creditors could |
| insidious process. It stands as a protector of property | | | | exchange paper for gold). In order to preserve the |
| rights." - Alan Greenspan | | | | nations gold hoard, President Nixon closed the gold |
| Think that $20 bill in your pocket is money? Think | | | | window. Now, paper money was not backed by |
| again... it isn't! Real money has three very distinct | | | | anything at all... this paved the way for inflation through |
| attributes: | | | | reckless money printing. Since it was no longer |
| * It must be fungible | | | | exchangeable for gold, the government could print as |
| * It must be divisible | | | | much money as it needed. The flood of new money in |
| * It must be a store of wealth | | | | the market place drove up prices. Homes, cars, and |
| Let's look at these attributes one at a time. | | | | everything else became more expensive. |
| To be "fungible" an asset must be exchangeable for | | | | The dollar in your pocket no longer money - it is fiat |
| another of equal value. The best example of a fungible | | | | currency. Fiat is a Latin term that means "by decree". |
| asset is gold. My 1 oz gold bar is worth exactly the | | | | That bit of colored paper only has purchasing power |
| same as your 1 oz gold bar. The same goes for silver | | | | because the government decrees it. The longer you |
| bullion bars. Why not use diamonds or some other | | | | hold it, the less buying power it will have. |
| gem stone? Simple - diamonds are a product of | | | | Now lets consider the purchasing power of gold. Soon |
| nature, and come in many different qualities. Diamonds | | | | after Nixon closed the gold window, the price of gold |
| have different colors, flaws, clarity, etc.... An ounce of | | | | averaged $42.02 per ounce. To buy a brand new |
| gold, on the other hand, is minted to a specific weight | | | | 1976 Cadillac Eldorado (retail price $7,546) would have |
| and purity. | | | | cost you 179.58 ounces of gold. Years later, in 2006, a |
| Divisibility is another important aspect of money. True | | | | similar car would cost $77,295. The price of gold |
| money must be divisible so that you can make small | | | | averaged $443.60 at that time. For the same 179.58 |
| purchases. Through out history, silver coins have | | | | ounces of gold, you could buy an XLR and still have |
| fulfilled this role. While gems have value, it is not | | | | $2,367 left over to buy 739 gallons of gas! |
| practical to use them for daily business activities. You | | | | Lets look at this another way. Rich Uncle has 2 |
| can't buy a loaf of bread and expect the seller to | | | | nephews. In 1976 he spends $420 to buy 10 ounces of |
| make change for a diamond. | | | | gold for one of his nephews. For the other boy, he |
| Last - true money must be a store of wealth. The | | | | places $420 in an envelope. He spent the same |
| dollar in your pocket has lost 97% of its purchasing | | | | amount of money on both boys. Now, in September |
| power since 1913, the year the Federal Reserve took | | | | 2010, the price of gold is hovering around $1,250 an |
| over our banking system. Here is a frightening fact: | | | | ounce. One boy has an inheritance worth about |
| The current rate of real inflation is about 6% a year. If | | | | $12,500. The other boy has $420. Which would you |
| you have 100k in the bank right now, it will only be | | | | rather have? |
| worth 53k 10 years from now. Clearly, the dollar is not | | | | While it is true that the price of gold and silver has daily |
| a store of wealth. | | | | price fluctuations, it still the best store of value on the |
| How did paper money lose it's ability to be a store of | | | | planet. Do not loose your wealth to mounting inflation - |
| wealth? | | | | choose the hard assets that have stood the test of |
| Prior to 1971, our currency was backed by gold. In | | | | time. |
| theory, one could go to the bank and exchange paper | | | | |