I read a very interesting series of comments in this article the other day which made me feel really good about my portfolio. Not that I feel secure per se, but because it shows me that I was right to follow my gut and avoid the bandwagon with so many other people I know who tell me to buy precious metals. It sounded too good to be true, and I have learned by enough sad experience to steer clear of it.
According to this article, the worth of gold is tied to the dollar. The problem with that is that the dollar only has value because the US Government says it does. Since Obama took office, the Treasury has printed dollars at an unprecedented rate, up to 1000 times the number of dollars in circulation compared to when the US first went off the gold standard. So, the dollar is worth a lot less, which is why gold, relative to the dollar, seems to be worth so much more.
Herein lies the problem. Now that the government has deflated the dollar relative to gold, it may do what every other nation with a fiat currency has done. They may change, by law, the exchange rate of dollars to gold. What this means is that if you bought gold at $900/oz, if the government changes by passing a law the gold exchange rate to $450/oz, the government just wiped out half of your money. Governmetns do this so they can buy back gold and then repeat this process. Gold only has value because we say it does. In and of itself, it's completely useless. You can't eat it, cook with it, make tools out of it, etc., as I have previously written. Gold only has value because people place value in it.
What I do intend to buy is commodities. I have a friend who keeps tobacco and coffee in his food storage, not because he uses them, but because he knows he can trade them for things he values if his money goes to absolute zero for whatever reason after whatever fashion. Some commodities don't keep very well, but everyone has to eat and poop, so the foodstuffs and paperstuffs as well as the information, skills and talents to produce them may one day become the most valuable things of all.
I don't know exactly what to do with my money. The government continues to deflate its value with debt and the printing press while my pay is cut, my expenses go up, and taxes rise. Maybe some day, I will be relieved of the bother of worrying about it at all. It will make pretty wallpaper.
According to this article, the worth of gold is tied to the dollar. The problem with that is that the dollar only has value because the US Government says it does. Since Obama took office, the Treasury has printed dollars at an unprecedented rate, up to 1000 times the number of dollars in circulation compared to when the US first went off the gold standard. So, the dollar is worth a lot less, which is why gold, relative to the dollar, seems to be worth so much more.
Herein lies the problem. Now that the government has deflated the dollar relative to gold, it may do what every other nation with a fiat currency has done. They may change, by law, the exchange rate of dollars to gold. What this means is that if you bought gold at $900/oz, if the government changes by passing a law the gold exchange rate to $450/oz, the government just wiped out half of your money. Governmetns do this so they can buy back gold and then repeat this process. Gold only has value because we say it does. In and of itself, it's completely useless. You can't eat it, cook with it, make tools out of it, etc., as I have previously written. Gold only has value because people place value in it.
What I do intend to buy is commodities. I have a friend who keeps tobacco and coffee in his food storage, not because he uses them, but because he knows he can trade them for things he values if his money goes to absolute zero for whatever reason after whatever fashion. Some commodities don't keep very well, but everyone has to eat and poop, so the foodstuffs and paperstuffs as well as the information, skills and talents to produce them may one day become the most valuable things of all.
I don't know exactly what to do with my money. The government continues to deflate its value with debt and the printing press while my pay is cut, my expenses go up, and taxes rise. Maybe some day, I will be relieved of the bother of worrying about it at all. It will make pretty wallpaper.
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