The Past as Prologue - A Cautionary Tale
As I ponder upon the future of an economy based on fiat money, I cannot help but feel a sense of trepidation. You see, while it may seem like we have everything under control, the truth of the matter is that inflation is a very real threat that we must not underestimate!
The concept of fiat money has been around for centuries, but its prevalence in modern economies has only become widespread in the past century. One of the earliest examples of fiat money dates back to the 11th century in China, where the government issued paper currency to replace the use of bulky coins. This paper money was not backed by any precious metal or commodity, but instead relied on the government's promise to pay the bearer of the note.
In more recent history, the U.S. dollar was officially removed from the gold standard in 1971, making it a fiat currency. Since then, the U.S. economy has experienced periods of both high and low inflation, often influenced by government policies such as changes in interest rates or money supply. In the late 1970s and early 1980s, for example, the U.S. experienced a period of extremely high inflation. This was due to the oil crisis as well as a significant increase in government spending during the Vietnam War.
Similarly, in the 1920s, Germany experienced hyperinflation after World War I, largely due to the government's decision to print large amounts of money to pay off war debts. This led to the rapid devaluation of the German mark, with prices increasing by the hour and people struggling to afford even basic necessities.
Inflation is a silent predator that slowly but surely erodes the value of our currency over time. And while a little bit of inflation may not seem like a big deal, over the course of several years or decades, it can have a devastating impact on the purchasing power of the average person.
The problem with fiat money is that it is not backed by any tangible asset, such as gold or silver. Instead, its value is derived solely from the faith and confidence that people have in the government that issues it. This means that if the government loses the trust of its citizens, the value of the currency will plummet!
Furthermore, governments have a tendency to print money in order to finance their spending with debt. When there is too much money chasing too few goods, prices will inevitably rise. And once inflation takes hold, it can be very difficult to control.
As someone who has seen the effects of inflation firsthand, I understand the importance of finding ways to protect your wealth. In addition to investing in assets like real estate and stocks, it's worth considering adding precious metals like gold and silver to your portfolio!
Throughout history, gold and silver have proven to be reliable stores of value, especially during times of economic uncertainty and inflation. For example, during the 1970s when inflation rates in the United States soared to over 13%, the price of gold increased by more than 2,000%. And during the Great Recession of 2008, gold prices rose from around $700 per ounce to over $1,800 per ounce in just a few years.
When you invest in precious metals, you're essentially buying a physical asset that has intrinsic value. Unlike paper currency, which can be printed and devalued at will by central banks, gold and silver have limited supply and can't be manufactured out of thin air. As a result, they tend to hold their value over time and can even appreciate in price when inflation is high.
Of course, it's important to keep in mind that investing in precious metals should be done as part of a diversified portfolio. While gold and silver can help hedge against inflation, they may not provide the same level of returns as other assets over the long term. Nonetheless, I believe that including precious metals in your investment strategy can be a smart way to protect your wealth and prepare for an uncertain future.
I look forward to sharing more on this topic in my new book “Counterfeit Trust & The Nature Of Money” launching on Kickstarter later this year. Please consider signing up to be the first to get a copy- early backers will receive unique gifts, including a dedication in the book!