I was reading the latest edition of the Gold and Oil Guy Newsletter and everywhere you look there is uncertainty in the world. Except in the gold and gold ETF markets. Gold ETF funds just keep going up.
The United States, the richest country in the world, can’t afford to pay its debts. Even more troubling, its politicians seem incapable of grasping the severity of the downside their current game of brinksmanship could deliver. Even having struck a “deal” to increase the debt ceiling, ratings agencies will certainly downgrade the credit rating of the US and thus INCREASE the interest rates on the unafforadable debt.
What makes it even more concerning is that the US Treasury is already purchasing over 80% of the debt its creating – so basically, the US Treasury is selling debt to itself and just printing money to pay for it.
This is the downside to a fiat currency is that the creation of paper money is backed by nothing, so when times get tough, government’s just find it easier to print money than cut costs. Sound familiar?
History shows that this happens repeatedly – it happened to Rome, it happened to the Chinese in 960AD, it happened to the French TWICE in the 18th century, the Weimar republic in Germany after the first World War, Argentina on a couple of occasions and its even already happened once to the US – in 1863 President Lincoln signed into law the Legal Tender Act and it was finally replaced with the Federal Reserve system in 1913.
What’s even more scary is that most people have no idea that the US Federal Reserve isn’t even owned by the US Government – its owned by international banks! Makes you wonder who’s really running things, doesn’t it?
However, like the laws of physics state for every action there is an equal, opposite reaction. The more countries print money and go deeper in debt, the more valuable gold becomes. When the Bretton Woods system was established in 1944, the US Dollar became the international standard because the US Dollar was pegged at $35 per oz. of gold. This system held until the early 70′s when the US began outspending its means and President Nixon got rid of the pegging. From $35 in 1944, gold sits today at over $1638 per oz. Many economists predict it could go as high as $5000 with its good friend Silver following it.
What does this mean for the average person?
Think about it… If the US Dollar is going through a period of inflation and devaluation, then putting your money in the bank in US Dollars is pointless, it sits there become worth less that it was the day before. On the other hand, gold ETFs are on the rise because they are backed by actual gold holdings. Trading in pure gold bullion is complicated, but gold EFTs can be traded very easily online. You can effectively jump online right now and with some diligent research find a few gold ETF funds that are well positioned and convert your excess cash that’s diminishing in value to the standard currency the world has adopted throughout history when times are tough, gold.
I highly suggest that you do you research though before divind in. We STRONGLY RECOMMEND that you subscribe to the Gold and Oil Guy Newsletter so that you can stay on top of everything happening in the commodities sectors.
*Disclaimer – The author is not a Professional Financial Advisor and this commentary is opinion, not financial advice. Before making any investments of your own, seek out the advice of a qualified Professional Financial Advisor!