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Today we are confronted with the beginning of what the Russian economist Kondratiev once called the “death cycle,” according to his judgment, this cycle inevitably repeats approximately every 60 years. A similar economic and legal situation developed during the global economic crisis of 1929-30. and between the first and second world wars. Against the background of global economic decline and the uncontrolled production of currency unsupported by real capital, world superpowers have so far avoided the onset of a new global economic crisis, but the risk of currency hyperinflation is growing rapidly with the economic problems of Europe and the American continent, the question no longer sounds like “what , if? ”, now we ask ourselves“ when? ”. To get the most out of taxes, world superpowers are increasingly freezing bank accounts and entering into various tax information sharing agreements that, in turn, deprive people of personal freedom and criminalize global financial activity. Just as it happened during the times of Nazi Germany and the USSR, in the impoverished countries financial activities are becoming more and more criminal – in other words, keeping money in a bank account is no longer safe – either legally or in terms of capital preservation. Precious metals have always protected from political and legal woes, many of the wealthiest families that own banks used this circumstance. For example, not so long ago, the Rothschild banking house removed its assets in gold and silver from England and America, just as it once took them out of Nazi Germany.
In this article we will explain to you why it is better to keep part of the capital in gold or silver, and why New Zealand is great for this. Here are the most obvious reasons:
The history of gold and silver as money
Gold and silver were mentioned in ancient manuscripts as means of payment 5,000 years ago. But why did people choose these metals for this purpose? Even Aristotle noted that money must be durable, easily portable, divisible, uniform, with real intrinsic value. After many years, it became clear that gold and silver are exactly the materials that meet all these requirements.
Gold and silver act as:
The paper money we use today meets the requirements of 2 and 3 but is absolutely not reliable as a means of saving capital. Quite often you can hear that good toga and sandals in ancient Roman times cost an ounce of gold. Today, for an ounce of gold, we can still purchase an excellent men’s suit and a pair of high-quality shoes, which is not the case with any legal paper money that was in use some hundred years ago. At the beginning of the 20th century, we could still buy a suit for twenty dollars, but today, after a century, only a pair of socks can be purchased for the same twenty.
Such a loss of purchasing power once again speaks of how we, over the past hundred years, are increasingly moving away from the possibility of using gold and silver as money. It all began when the end was put to what was called the classic gold or gold coin standard during the Great Depression. At a time when state-owned banks still used gold to pay off debts to other countries, an ordinary person from the street could no longer exchange their banknotes for gold coins, even if he thought that the government allowed himself to overspend, and banks too easily offered loans to everyone contract and depreciate his money.
We moved further away from gold, like money, with the signing of the Bretton Woods Agreement after World War II. It was then that the dollar became the main pillar of the world monetary system, thereby replacing gold. The US government was supposed to keep the dollar at a fixed rate against gold, while other countries could still claim gold instead of US currency. In other words, the dollar simply had to be “as good as gold.”
But in the 50-60s. America invested too much in military and social programs, government revenues were simply not enough to finance them. To cover these expenses, the country began to create a huge amount of dollars that were not supported by real capital.
Ultimately, the French president, Charles de Gaulle, began demanding gold from the United States instead of depreciating dollars. The States, realizing that other countries will follow the example of France and that their gold reserves may soon run out, closed the “golden window” in 1971 allegedly “for a while”. Gold turned out to be completely outside of the monetary system. It is particularly noteworthy that for the first time in history, legal money issued by the government began to be used at the same time in every country. The currency, not backed by real capital, created for plugging debt holes, has been used throughout the world.
That same, supposedly temporary condition, under which dollars are not replaced by gold, is, in fact, valid today. Thus, dollars and, accordingly, the entire world monetary system remain unsupported by gold. All money is printed to cover the debt – a debt that will never be paid.
Why buy gold and silver?
The mechanism of indefinite debt is clearly coming to an end. Obviously, there is only one huge debt, but the financial events of recent years indicate that this “debt bubble” is about to burst.
How can gold and silver protect us in a similar situation?
Your complete inseparable possession of real gold and silver is the only kind of capital that is in no way dependent on other persons. Thus, any “partner risk” is excluded, because there are simply no partners.
What can gold or silver protect us from?
Devaluation – as we mentioned above, paper money has been steadily depreciating throughout the last century. The role of precious metals, which we have defined as a “means of saving capital”, implies protection against the devaluation of currencies imposed by the government. It does not matter whether it is a slow, but inexorably rising inflation, or a sharp depreciation of the currency per day according to a government decision.
Hyperinflation – There are many historical examples of this phenomenon, and some of them are even from the twentieth century. For example, recent events in Zimbabwe, or the notorious German experience in the 1920s. People preferred a more stable foreign currency or precious metals, not wanting to exchange goods for local money. Although, of course, none of the currencies that exist today can be called truly stable.
Derivatives (derivative financial instruments) – According to the International Settlement Banks, the derivatives tower worldwide has already grown to 647 trillion dollars. In 2008 it became clear that this “house of cards” could collapse at any moment. Gold and silver are able to protect against the general collapse of the monetary system, which is more than possible if you push one of the dominoes’ knuckles. And all this again because physical precious metals are not part of the financial system and eliminate the risk of partnership.
Negative real interest rates – There is a misconception that gold is not the best option for investing with rising interest rates since gold does not imply paying dividends or interest. However, the main indicators are real interest rates. The real interest rate is the nominal interest rate minus the expected rate of inflation. Today, the motivation in the form of interest on keeping money in the bank is very weak, real interest rates are actually negative at all.
You can see how gold continued to rise in price throughout the 1970s until interest rates became positive again. However, today, state-owned banks are in a more difficult situation than it was in 1980, and it would be incredibly difficult to raise interest rates to successfully compete with gold, without destroying its own economic structure in the process. Therefore, if bank interest rates had risen, inflation would have increased, and real interest rates would have remained negative, while gold would continue to rise in price since keeping dollars in a bank would still not seem like a tempting idea.