How to Invest in Gold and Silver?

Shift "money" into real assets since the dollar is worthless

Master Investor
April 27, 2024

Summary:

The wealthy rely on actual money rather than dollars.
An understanding of financial history is necessary to distinguish between paper money and genuinely valuable assets.
This article discusses the reasons why saving money is a losing endeavor.
Gold and Silver are assets that belong to the asset class of commodities.

The dollar became counterfeit money the moment Richard Nixon removed it from the gold standard earlier in 1971. The dollar was no longer supported by sound money, or gold. The US dollar was reduced to a large note.Take a look at the following chart to gain more insight into the inverse relationship between the US dollar and gold.

Over the past century, the dollar's purchase power in respect to gold has sharply declined. But gold and the US dollar aren't the only assets that have the opposite relationship. The value of all currencies has decreased in comparison to gold, as seen in the accompanying graphic.

An cautionary story based on gold and silver mine investment experience

An investor established a silver mining firm in South America and a gold mining company in China in 1996. In the end, both businesses went public on Canadian exchanges. At the time, investor founded mining firms for gold and silver because investor thought the metals were at "lows" and would soon rise again. Silver was about $5 an ounce at the time, while gold was about $275. Many would have lost the mines if they had been mistaken.But since investor wasn't placing a wager on gold or silver, investor felt secure about them.

Instead, he was placing bets against the oil and dollar. When oil prices were at $10 per barrel in 1996, that appeared modest. Many felt the stage was set for a significant shift in the markets because he had concerns that the dollar was strong and that it would weaken when oil prices increased. One could argue that those circumstances still exist now. The impact of the epidemic, the current national debt, and the trade balance are all contributing to the dollar's decline and the rise in oil prices. As a matter of fact, investor recently purchased additional gold and silver in order to hedge against the currency and oil once more. The investor has been rather accurate thus far.

In 1996, the price of a barrel of oil was $22, but today it is about $82.00.In 1996, the price of one ounce of silver was $5.00; today, it is approximately $23.In 1996, the price of one ounce of gold was $387.00; today, it is over $1,830.Meanwhile, inflation has caused the dollar's purchasing power to decline by almost 95% since 1996.

A recession or inflation?

The situation is significantly worse now than it was in 1996 in many aspects. The dollar is becoming less and less in demand these days. It seems that the Federal Reserve is expanding the currency supply concurrently.As we are aware, when there is a decrease in supply and demand, the value of everything, including the dollar, falls. When the Great Recession hit, Ben Bernanke, the newly appointed Fed Chairman, was faced with a difficult decision: if he increased money printing to support the dollar, inflation would rise and the currency might plummet. The economy might enter a recession if he increased interest rates in an attempt to curb inflation.

The Federal Reserve has been stuck in a pickle for decades: "Do we choose one kind of recession or another?" View the explanation that follows.

American-Style Depression

Government attempts to falsify the gold standard led to the Great Depression. During World War I, large debts were incurred. Governments found it difficult to settle those obligations because the value of their currencies was based on gold. Due to gold, money could only be printed to a certain extent. We could only print three million dollars if we possessed a million ounces of gold and could only print three dollars for each ounce. Nevertheless, governments made every effort to circumvent the gold standard.

Millions of people lost their life savings as banks failed as debt grew and default rates increased. We would lose everything if a bank failed since there was no FDIC. People started to lose money, therefore they stopped spending, which led to a collapse in prices. Rapid increases in unemployment led to even lower consumption and worse deflation. Leading to the biggest economic disaster in US history was a catastrophic spiral. The US was unable to print its way out of the crisis since they were dependent on the gold standard.

Depression in the German Style

It was not like that in Germany. Rejecting the gold standard, the German government chose to start printing money as fast as the presses would allow. There was severe hyperinflation as a result.

Germany's monetary supply multiplied by 17 billion, from 29.2 billion marks to 497 quadrillion marks, between 1919 and 1923. An ancient tale tells about a woman who went into a store to buy a loaf of bread and left her wheelbarrow full of German markings outside. Her wheelbarrow was taken when she returned, but the cash was not. That is how hyperinflation causes devastation. The amount of money that is printed so rapidly makes it almost worthless.

As everyone is aware, the Fed decided to print trillions upon trillions of dollars. It appears that we have made our decision and are laying the foundation for a future depression a la Germany. When? Nobody can say for sure, so it's best to get ready now.

The rationale behind "saving" money

The value of the dollar decreases daily. That's the reason you ought to save them. As this can seem contradictory, let's recap: Even though money is becoming less and less valuable, we should still keep it because we don't need to hold onto it. Money is garbage.

The have-nots value money; they earn it, save it, hold onto it, and lose it. This is one of the reasons why there is such a large disparity between the haves and the have-nots in the world.A common statement attributed to Warren Buffett is, "The best way to get rich is to not lose money." People lose money when they save US dollars, buy consumer goods like a new automobile, or use loans to finance commodities that lose value. While some refer to it as inflation, we refer to it as devaluation. Psychologically, Americans worry more about money the more their cash and the items they purchase with it lose value.

Many start working longer hours or, worse, incur more debt as a result of buying more sliding-value consumer goods. Sadly, a lot of people end themselves with diminishing amounts of money that keep losing value. On the other side, the reason individuals like inside investors (capitalist) amass an increasing amount of money is simply because to their lack of hoarding. Rather, their goal is to acquire the maximum amount of money and allocate it towards assets that are increasing in value rather than decreasing. During the computer and dot-com stock boom of the late 1990s, many wise investors invested their monies in real estate, gold, silver, oil, and oil at cheap prices.

We shall all keep our money working among the five asset classes that exist now, albeit much more cautiously, as the value of the dollar declines.

Financial catastrophe on the horizon

Our bearishness towards the US currency is the main factor driving the movement of dollars. The expression "The U.S. dollar is backed by the full faith and confidence of the U.S. government" is one that we have all heard. It is regrettable that people's trust and faith in the United States government are declining. The necessary reforms to run a fiscally prudent government and preserve the dollar are unpopular among Americans.

More Americans opposed President George W. Bush's attempt to change Social Security than they did the Iraq War.

People adore their privileges. The U.S. dollar was shot to pieces as Bush pushed through the Prescription Drug Benefit plan. There was no longer any chance of a financial catastrophe.It's time to place your faith in gold and silver, the antiquated forms of money, rather than relying on "the full faith and confidence of the U.S. government."It's odd, yet some individuals don't believe that gold and silver are valuable assets, or at least not valuable enough to save.

Gold vs. the US dollar

A couple of years ago, R.A. wrote in The Economist as to why he believed that gold was not money. "But even though gold isn't money, it does have one very important thing in common with money: the market determines how much value it has, aside from a few specific industrial uses."It is also the case with fiat money. Because humans have decided that dollars are valuable, they do. However, as the author of The Economist notes, money may be created freely and readily, rapidly losing value. Conversely, gold possesses an inherent scarcity. But fiat money functions just like that.

People only think that the small bits of paper we call dollar bills are worth a basket of actual commodities because they share this belief with everyone else. The primary distinction in how value is perceived is that while fresh banknotes may be generated by the truckload at almost no marginal cost, new gold can only be gotten very difficultly. Because most people still believe that paper money is money, gold isn't considered money in the traditional sense of the word today. The author comes to the conclusion that because humans have chosen to be happy with money, dollars will always be money. And with reference to gold?

"What I don't understand is the argument for gold that relies on the mysterious, 6,000-year-old Law of Economics, which states that shiny yellow metal is somehow special," the author writes.

Existing on a borrowed time

Consider this riddle: What happens when people decide they no longer wish to accept paper dollars as money, even if the writer seems to think it's impossible? What occurs if the Federal Reserve creates so many dollars since the process is so straightforward and the number that may be generated is limitless that people decide not to accept them as currency? What will money be then? All fiat currencies—currencies that have value purely because of a claim made by an authority—have decreased to zero throughout the history of money. Conveniently, the author of The Economist overlooks mentioning this information.Furthermore, societies have consistently used gold as money throughout history. As the author of The Economist notes, this has continued for six millennia.

If the author so chooses, this could be described as mystical, but that is one impressive track record.

In actuality, the dollar is dependent on gold for its existence, meaning that it is living on borrowed time.

The dollar is worthless

There is no denying that American debt is substantial. It was a respectable portion of our GDP for a long time, making up between 50 and 60 percent of it. However, since 2007, it has increased significantly; as of April 2020, our debt is 97% of GDP, but it is predicted to rise to 119% of GDP by 2023. Yes, it is expected of us to owe more than we earn.

It doesn't take a genius to figure out that you will eventually collapse if you keep accruing more debt than you make. The dollar will be destroyed and savers will suffer losses if the United States defaults on its debt. Many people will regret not saving more of the so-called gold if the US defaults on its debt. Because people will look to it once more as the repository of worth, just as they have done numerous times over the past 6,000 years. However, maybe the US will resolve its debt issues. In such case, the dollar will endure—at least temporarily. But the dollar will finally come to nothing, just like all previous fiat currencies did.

In either case, the dollar is useless. It might happen later instead of sooner.The issue with the US debt is that entitlements are a major factor in it. The cost of mandated programs like Social Security and Medicare accounts for more than 60% of our debt. As the baby boomer population ages, funding for these programs will only increase. This diagram, which is based on Visual Capitalist, illustrates it:

It is feared that international public opinion would quickly grow weary of America's egregious economic mismanagement and become reluctant to use US currency. Interest rates need to go up in order to maintain global interest in the US dollar. U.S. assets will lose value when that occurs, particularly paper assets like stocks, bonds, mutual funds, and savings. Because replacement costs are high, some real estate prices will rise, while overpriced real estate will decline. To put it mildly and avoid coming off as a hypocrite politician, paper assets and real estate will continue to appreciate in value. Being extremely cautious and discriminating is the key to surviving in real estate and paper assets. Diversification will make people lose.

Those that concentrate will succeed.

Invest in commodities to protect yourself from future borrowing

Keeping our wealth in real money instead of US dollars is the key to surviving the next few years. Invest in items that are globally exchangeable and have intrinsic value. The global market for commodities like gold and silver transcends country boundaries, politics, religions, and racial distinctions. Even if a person disagrees with the religion of another, he will nonetheless take his gold.It's crucial to keep in mind that during depressions, wealth is merely moved rather than disappearing.In the upcoming years, a lot of individuals will be immobilized by terror. However, this will be a once-in-a-lifetime opportunity for the financially astute.

For individuals without sound financial advice, you should think about investing as much as you can in gold or silver to guard against inflation. Keep an eye out for offers if your financial intelligence is good. Be prepared to seize assets as their prices plummet.The largest wealth transfer in modern history is about to occur. You can choose to lose everything or to be the one getting it. Those with and those without financial intelligence will be the dividing line. Our bullishness on gold and silver is partly due to the fact that the American people is still largely unaware of this asset class.

The majority of Americans are unaware of where or how to purchase actual gold and silver. The stores that offer gold and silver are already running low on stock.The panic and stampede will start if and when the American people realize that their dollars are just a kind of currency and not actual money. In such case, the prices of gold and silver today will appear to be quite low.Very few people know today that one of America's largest actual silver stockpiles is purportedly owned by Warren Buffett. When silver was cheap in the late 1990s, he bought it, even as some people were criticizing him for not investing in tech stocks.

What's the meaning of it all?

What thereafter will transpire? The truth is that nobody is sure.

One thing is certain, though: the dollar is having problems. The wealthy are aware that savers lose money, therefore they're always searching for assets to shift their funds into.

We have to think like the wealthy in order to be wealthy.Buying gold and silver is not required. Make sure we weigh the risks, complete your homework, and decide it's the appropriate thing to do before proceeding. Don't forget to start searching for locations to transfer our funds. If our goal is to become wealthy, we should make investments in assets that can be a hedge against inflation, whether they be in the form of real estate, businesses, technical stock investing, or commodities. What do we think now? What do we suppose the situation with gold is? Which assets are we attempting to fund with our money