Gold Rush 2020: Why the time to invest in gold is right now by Phil Taylor-Guck

Gold Rush 2020: Why the time to invest in gold is right now by Phil Taylor-Guck

Author:Phil Taylor-Guck [Taylor-Guck, Phil]
Language: eng
Format: epub
Publisher: Rethink Press
Published: 2019-11-03T20:00:00+00:00


Gold vs. fiat currencies

All of which brings me neatly to the next plus point for gold: reliability. Considered from this viewpoint, it is difficult to see why the paper alternative has become so popular. Fiat currencies have been around since the time of the Romans and their history has been littered with failures. In fact, a study of 775 fiat currencies by Dollardaze.org found that there is not one single historical example of a flat currency holding its value. They have been monetarily reformed (24%), still in circulation, awaiting outcome (23%), destroyed by war (21%), failed through inflation (20%) or destroyed by independence (12%).5 It’s hardly an inspiring record.

The innate problem with fiat currencies is that they are based on a coercive, rather than a voluntary, market relationship. A central bank is tasked with keeping things in check and will seek unfettered control in order to see off threats from competing currencies. Unfortunately, governments are not run by all-knowing, infallible, selfless individuals who consistently make financial and economic decisions for the good of the whole of the population. Even if government offices were staffed with financial geniuses, the most careful and prudent planning can unleash unintended consequences requiring further interventions. This has unquestionably been the case with QE and QT, as discussed in chapter 1.

To see how this might impact your wealth, let’s take the dollar, since it is still quite closely related to gold. Every dollar bill has three words printed on it: Federal Reserve Note. The word ‘note’ indicates that it is a debt, or an obligation, or a promise. The Federal Reserve is backing that dollar. If you have one in your wallet, it is backed by your faith in the USA and its exemplary credit rating. As we have seen, this faith can be stretched somewhat. The Fed could choose to add to the supply of money and dilute the value of that dollar. You have no influence in that decision. In fact, the USA has tripled the supply of its money over the past decade.6 When interest rates go down, the cost to borrow a dollar becomes less. At the moment, borrowing a dollar has never been cheaper. Adding substantially to the National Debt will also weaken and devalue a currency: something that the USA has been doing on a grand scale for the past decade. Now compare this scenario with gold. When you own an ounce of gold there is never any danger of counter-party risk. There can be no claim against it. Its value is only ever determined by one consideration: the price someone is prepared to pay for gold on a particular day.

Another inescapable problem with fiat currencies is that they require relatively few physical and economic inputs when they are produced. This means they have no direct correlation whatsoever with the physical world, or economic realities. The quantity of fiat currencies is therefore decided by central planners, which means that the money supply in fiat currencies is often a wholly inaccurate reflection of the true trading environment.



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