Jul 08

Gold-101


The Number One Reason to Own Gold and Silver is NOT What You Think It Is:

The number one reason to buy physical gold and physical silver (not paper gold and paper silver, which is not the same thing) is very likely not what you think it is. I can deduce the number one reason why most people buy gold and silver simply from the disproprotionate amount of questions I receive about buying gold and silver whenever gold and silver prices are rising significantly versus when gold and silver prices are falling. In other words, most people believe that that top reason they should buy gold and silver is to profit from rising prices. However, this is far from the best reason to buy physical gold and physical silver. The number one reason to buy physical gold and silver, bar none, is the global currency rot that is happening today, that is relentless, and that Central Bankers are now helpless to stop (though they are responsible for creating it). Of course, some may say that benefiting from rising fiat currency prices of gold and silver is the same reason as protecting onself against currency rot, but in reality, these two reasons for buying gold and silver are as different as night and day, and here’s why. Of those that want to benefit from rising fiat currency prices of gold and silver, the vast majority are looking for a quick score, and they buy gold and silver for this reason without even taking the time to truly understand the value of gold and silver. Those seeking a quick profit from ownership of gold and silver typically fail to understand that:

(1) the true value of gold and silver is immutable and defined by its weight in grams or troy ounces;

(2) that gold and silver should never even be priced in terms of illegitimate fiat currencies; and

(3) during periods of time when fiat currency prices of gold and silver drop, a dropping fiat currency price is only indicative of an incredible opportunity to buy similar values (weights) of gold and silver while spending less fiat currencies to do so.

As an example of this incorrect mindset, a the end of this past May, I informed a couple of friends that gold was making a short-term low at about $1200 and silver was doing likewise at $16. Because both PMs have risen considerably in fiat currency prices since then, one of these friends incredulously asked me at the start of this week if he should sell his gold and silver because both PMs had moved significantly higher in such a short time-span. In hearing this inquiry, I realized that he didn’t understand the number one reason to buy physical gold and physical silver in the first place – the protection it affords all of us against Central Banker-induced global currency rot.

Everywhere you look, there are stories from every continent in the world regarding currency collapse and the hundreds of millions of lives ruined by Central Banker-created currency rot. Of course, you will never hear of this critical global issue promoted by the  banker-bought-and-paid-for mainstream media even though these unfolding tragedies should be front and center on page 1 as these are critical stories of which everyone should be aware. And because these stories are largely ignored by the banker-bought-and-paid-for mainstream financial media, this is the number one reason most people are shockingly unaware of the global currency rot that is happening right now. Fortunately, with a tiny bit of effort and just a little bit of research online, one can easily track down and uncover these stories.

If you haven’t been asleep for the last five years, if one knows nothing else about this super important story of global currency rot,  the main story of currency rot everyone knows about is the rapid collapse of the Russian ruble from about mid-2014 to the end of 2015. Since then, the ruble has recovered slightly, but not enought to save anyone that stored large amounts of their wealth in rubles during this time period. Many times, people make the mistake of thinking that because their domestic currency has only devalued slightly up until now, that there will always be time to exit the currency and move to a sound currency like physical gold and physical silver. Thus, they endlessly delay executing strategies they know they should have executed at least a year ago, due to this “slow burn” that can be quite deceptive. For example, from early 2012 to the end of 2013, over 2 years, the Russian ruble lost 3% of valuation against the US dollar, a “slow burn” that tricked many Russians into remaining complacent about their faith in an unsound fiat currency. And in the first 7 months of 2014, the ruble lost another 3%. Again, many Russians were unhappy with the devaluation of the ruble, but they felt as though they could live with such devaluation and would take action if it became necessary, thinking they could front-run the event, even though warning after warning and red flag after red flag in the form of ongoing devaluations had already occurred that should have prompted every ruble-owning Russian to convert their fiat currencies into the sound money of physical gold that was far more stable. Then, while most Russians were still ignoring all the previous warning signs from July to the end of the year in 2014, the ruble fell off a cliff and collapsed, rapidly lost a massive 50% in purchasing power, and unfortunately, for the procrastinators,  rapidly destroyed their savings in the process. In other words, by the time the “event” happened for which Russians were waiting to trigger action, it was already too late to act. What about those that converted rubles to gold in mid-2013 because they had the foresight to plan for the time in which Central Bankers would ruin the ruble fiat currency? From mid-2013 to present day, their gold, priced in rubles, has risen by about 120%, more than enough to preserve their purchasing power in their home country and more than enough to help them avoid the fate of most of their fellow countrymen that lost much of their life savings in a very short period of time.

Though there are literally dozens more examples I can provide that are comparable to the story above and I will provide one more example in this article of a failing emerging market fiat currency, people that live in industrialized nations tend to believe that there domestic currencies are “safe” because they fail to understand that Central Bankers are ruining currencies in every single country in the world today. They make a huge mistake of thinking “I don’t live in an emerging market, and that problem in Russia is an emerging market and third world country problem that will never happen in my country.” They further mistakenly believe, “A 50% devaluation of my fiat currency in 6 months can never happen. That is a problem of emerging markets and not industrialized, ‘modern’ markets.” Thus, they mistakenly conclude, with great confidence, that the process of fiat currency devaluation in their country will be much less volatile, and therefore provide them with much more time to react to the problem when it develops.  In other words, they believe that there is no need to plan because they can just react to warning signs in the future without realizing that multiple red flags and warning signs are already here. The free fall in purchasing power of the Ukranian hyrvnia, the Russian ruble, the Venezuelan bolivar and the very significant 20% to 30% devaluations of fiat currencies in several industrialized nations and dozens of other emerging markets ARE the red flags for which residents of industrialized countries are waiting, but have failed to identify.

Let’s use Canada as an example to make my point. No one ever thinks of Canada as anything but a modern, industrialized nation that would not suffer the same fiat currency problems as an emerging market country, and indeed, if you are not Canadian, you may be entirely unaware of the real and very significant struggles that have afflicted the Canadian dollar, or looney, in recent years. Like the Russian ruble, for the past two years, the Canadian dollar suffered some fairly significant swings in value against the US dollar but nothing that concerned most Canadians, though these swings should have been massive red flags to all Canadians of the already unstable nature of the looney. In 2011, the Canadian dollar swung 5% higher and nearly 7% lower from its starting point against the USD during the year but by year’s end was nearly unchanged, so most Canadians did not believe there was any need to diversify out of the Canadian dollar into a sound form of money like physical gold. The following year in 2012, during the course of the year, more red flags materialized as the volatility of 2011 continued, but again, the year closed with the Canadian dollar nearly unchanged against the USD, so most Canadians continued to ignore the massive red flag of currency volatility and instability, falsely believing that they still had time to respond reactively, instead of proactively, to the unstable Canadian dollar. However, as was the case with the Russian ruble, the fall came quick and hard for the Canadian dollar and in just 2-1/2 years, from mid-2013 to the end of 2015, the Canadian dollar plunged by more than 30% against the USD. Again, for those Canadians that understood that Central Bankers are destroying fiat currency valuations in ALL countries and consequently moved out of the Canadian dollar into gold before this significant currency rot happened, their gold appreciated significantly in Canadian dollars over this same time period, helping to preserve their purchasing power versus the substantial losses in purchasing power they would have suffered had they continued to hold devaluing Canadian dollars. If one needs to be reminded of how quickly a “strong” fiat currency (an oxymoron of word association) can unravel, merely recall the successful Brexit vote last month that caused the British pound fiat currency to plunge to 31-year lows in a single day.

Next, let’s look at the currency disaster that has afflicted citizens of Venezuela to provide a warning to everyone as to what they need to do to preserve their wealth during the continuing great currency rot and worldwide fiat currency collapse that is currently under way. In 2002, a USD could be exchanged for 1.6 Venezuelan bolivars. In April of 2016, many media sources reported that a dollar could be exchanged for more than 1,000 Venezuelan bolivars on the Venezuelan black market. Here’s how such a steep and rapid devaluation translates into real world problems. As of April 2016, Venezuelan media reported that a one kg bag of rice cost two days of wages for the average wage earner. And as of last month, the dailycoin.org reported that the average Venezuelan worker,  if they wished to buy a plane ticket to leave the country to escape this massive currency rot, would need to save two years of wages to purchase such a ticket! In other words, fiat currency collapse has ruined the life of the average Venezuelan. But what about those Venezuelans that took their cues from the currency rot events that had already been unfolding all around them and exchanged their bolivars into gold?  Within the past 5-1/2 years, gold priced in Venezuelan bolivars has soared by more than 444%, and this is just in terms of “official” government-set forex rates, which due to multiple “official” exchange rates, bizarrely range from 9 or 10 bolivars to several hundred bolivars per dollar. However, because the black market rate, as of Q1 2016, frequently reached in excess of 1000 bolivars per dollar, in essence, if one had changed bolivars into physical gold in Venezuela, and then sold some of this gold for US dollars to later be exchanged back into Venezuelan bolivars, not only would one be totally unaffected by the collapse of the Venezuelan bolivar, one would be prospering in such an environment of fiat currency collapse simply by having had the foresight to exchange intrinsically near-worthless bolivars into gold before the bolivar collapsed. And if no one wants Venezuelan bolivars, which is quite common, then one still owns gold, accepted as a universal money everywhere, or one can exchange gold into another fiat currency that is accepted. With the Venezuelan bolivar, this fiat currency is merely in the process of returning to its intrinsic value of zero, as is the destiny of all fiat currencies. In case one believes one is safe from our current orgy of Central Banker-induced fiat currency implosion by holding US dollars, remember two points.

One, the strongest option among a bunch of bad options is not a good option, and two, the destiny of all fiat currencies is to return to their intrinsic value of nothing, including the US dollar.

As I’ve stated above, procrastination is the enemy of wisdom, as procrastination in exchanging fiat currencies into sound money literally translated into an extreme difference between financial suffering and misery and financial prosperity in Venezuela today in less than a 6-year time span. Who will be the next country to become the next Venezuela? Most likely it will be another emerging market, but this probability does not negate the likely probability that these same problems will find their way back home to the industrialized nations that started these very problems as well (well, at least to the nations of the Central Bankers that rule these industrialized nations). And when it does, as we have all learned from the example of Venezuela above, you will either be prepared for it before it happens or try to react as it happens, but react too late,  and be wiped out financially.

The Central Banker destruction of all fiat currencies in every country of the world today demands a proactive approach and a reactive approach will fail. 

The example of Venezuela has taught us that we all have been provided ample and adequate warning to prepare for currency rot before it truly escalates in our own nation, but that shockingly, only a few among us will take the necessary actions  to survive it when currency rot rapidly escalates in our own country. Unfortunately, even those that see the beginning and intermediate stages of what has happened in Venezuela happening in their own countries, as is the currently the case in Canada, Australia, the UK, Portugal, Greece, Italy, Spain, Ireland, Kenya, Brazil, and on and on, likely will still ignore these red flags, simply because banker propaganda has prevented most of us from realizing the simplest of solutions – converting fiat currencies into the sound money of physical gold and physical silver.

 

In other words, not only is it human nature to not believe something can happen until it actually does happen,but it is also human nature to incredibly discredit an event as it unfolds before us, as long as it does not directly impact us significantly, until it invades our own personal space, directly affects us and denial of the truth is no longer plausible.

If you have read this article and are still skeptical, I urge you to study the current cases of fiat currency collapse that have happened/ and are happening right now in Venezuela, Russia, Mexico, Colombia, Argentina and Brazil. Studying and understanding the timeline of these currency collapses should truly awaken you to the very sobering probability of severe fiat currency devaluation and/or collapse in your country, no matter where you live.  Please refer to our prior two articles, “Three Charts that Show We’re Just Getting Started in the Second Leg Higher For All Gold and Silver Assets”, and “Why Intelligent Gold and Silver Mining Company CEOs are Deferring Sales of Current Production” to gain a fuller understanding of the global currency crisis.

To listen to a recent interview about where silver is heading, given by our Managing Director, JS Kim, to the SGT Report, click here.  Click here to learn more about the best junior gold and silver mining stocks in our Platinum Membership (mainly for accredited investors) and click here to learn about our flagship Crisis Investment Opportunities portfolio, up more than 16% in just the past month (3 June to 6 July). To be informed of our articles when we first release them (we originally released the above article on our website on 2 July 2016), please subscribe to our SmartKnowledgeU RSS feed. For occasional unpublished content, similar to this article, and unavailable anywhere else, sign up for our free newsletter.

NY Morning Update: TPTB concoted a particularly bogus US non-farm payrolls report for last month, releasing a 287,000 new jobs creation number this morning in NY that is being paraded by the mainstream financial news as proof the economy is “rebounding”, with the goal of smashing gold and silver prices likely in mind. Indeed, on this news, gold immediately waterfall declined by $25 an ounce as did silver by nearly $0.45. However, unlike past times such shenanigans have been orchestrated, gold and silver bounced back immediately and are now back in positive territory for the day as banker tricks seemingly no longer have the staying efficacy of past years. Let’s see how gold and silver hold up for the rest of the day as bankers cannot be happy about the immediate rebound in prices from the US jobs report takedown.

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