Silver, Gold and Living By The Sword

It is said that, “If you live by the sword, you die by the sword.”  Let’s expand the concept and confirm that ancient bit of wisdom.

If you depend upon your sword for self-defense and aggression, you can reasonably expect that someday you will meet another swordsman who will slice your body and kill you.

If a country depends upon war and its military strength for conquest and intimidation, eventually the military and the country will be damaged and/or defeated via war.  There are many historical examples.

If central banks depend upon the creation of nearly unlimited quantities of debt and paper currencies, eventually the excess quantities of debt and paper currencies will result in the destruction of their economies and the credibility of those central banks.  There are many historical examples.

If corporations and governments depend upon lies and misrepresentations for market share and control, eventually they will be branded as untrustworthy and will lose their markets and control.

If large banks depend upon huge leverage and derivative contracts to generate trading profits, those banks may fail when another derivative meltdown occurs.

Pension plans and many individuals depend upon debt based paper investments for long term income, but that income is only as good as the counter-party issuing the debt, AND the credibility and purchasing power of the currency.  This thought should bring to mind the phrase “danger zone.”

However, if an individual, business, or government depends upon something that has real value, such as safely stored gold bullion or silver coins, then their risk is considerably reduced.  Consider the benefits of gold and silver:

a)   No counter-party risk.  Gold and silver are not dependent upon a government or bank for their value.

b)   Gold and silver are not currencies that can be printed to the point of hyperinflation.

c)    The “sword” of derivative failure is largely irrelevant if you hold your assets in gold and silver.

d)   The “sword” of currency devaluation will have little effect upon your precious metals investments and your savings.

e)   Your gold and silver will appreciate in nominal dollars, euros, and yen as people experience the devaluation of those dollars, euros, and yen.

f)     An ounce of gold is forever an ounce of gold, valued globally, and always exchangeable for food, gasoline, and clothing.

If you live by the “sword” of debt based paper currencies, you can reasonably expect detrimental consequences as the purchasing power and confidence in those paper currencies gradually dies.

However, if you live based on the continuing value of gold and silver, you should experience a safer and more secure financial future.  

Gold sold for about $42 in 1971 when President Nixon severed the connection between the dollar and gold.  The Dow Jones Industrial Average was about 900 in 1971, and gasoline sold for about 34 cents per gallon.  Times have changed, prices have increased, but an ounce of gold has retained its value, unlike the US dollar and most other paper currencies.

If you live by the sword, you die by the sword.  If you live with paper money, you will need much more as its purchasing power is diminished each year.  Consider the risks!

GE Christenson

The Deviant Investor