The Case For Gold!

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Hi, I’m Steve Beaman and welcome to this SBG Cast on the Financial Path. My friends, for many years now I’ve been recommending that folks just like you hold a small percent of their net worth in actual gold or silver coins. With the myriad of issues now going on in Washington, in State Capitals, and even in cities, I want to revisit this and offer you solid logic behind the acquisition of gold for a percentage of your assets.

Most people don’t really think about it but the concept of “money” isn’t all that stable. What is money? How is its value set? Why does the grocery store take your paper note in trade for it’s hard goods? Well, we need to understand this as a basic concept because the answer affects you, and potentially very seriously. Let’s try to look at reality, without political spin, and without the fear mongering that frequently goes on in television and radio.

The simple fact is this. Today, the U.S. Government is in debt over $13,000,000,000,000 dollars and has what are known as unfunded mandates of another $65,000,000,000,000. In addition, the latest month added another $150,000,000,000 to that debt. Think about that, in ONE MONTH our government added $150,000,000,000 to an already staggering debt. In addition to this, we’ve passed a national health care program that even the governments own estimates show a net add to our deficit of over $1,000,000,000,000 – yes, that’s revised AFTER passage.

In addition to this, 46 of the States are broke by almost any definition. Even the city of Chicago, yes, just the city, announced that it is $4,000,000,000 underfunded. Folks, these are big numbers.

So, what does this mean to you and me? Ok, here’s where the rubber meets the road. The only way to reign in this debt is to either grow our economy out of it, or frankly restructure the debt . It’s no different than if you’re earning $100,000 per year and your bills are $500,000 per year. You simply can’t sustain that. So, you either grow your $100,000 per year income, or you restructure your $500,000 in debt .

Reality is, the U.S. economy will not grow enough to pay our debt…. by almost any economic scenario. So, that leads to option two, restructure the debt. You do this by either cutting it by reducing costs so you slowly get out of debt, or you simply make your debt go away by bankruptcy. For national governments, there is a 3rd option, create inflation. The effect on you and me of inflation is rising prices, meaning that your dollars are effectively worth less. Think about this. If today, you owe $100,000 in debt, and you earn $100,000, and food costs you $12,000 per year. What happens if that food now costs $24,000 per year? Well, simply your standard of living is cut in half. Well, in order to accommodate that, eventually wages catch up so your wage would over time reach parity and double. But your debt didn’t! It’s fixed. So, in inflation, you’re paying back your debt with dollars that individually aren’t worth as much. So let’s take that nationally. If today, our debt is $13,000,000,000,000 and there is roughly $2,000,000,000,000 in money supply, let’s just “devalue” the money 6:1 and voila, the debt is reduced to a nominal amount. They do this revaluation by just printing more money. I’m oversimplifying, but in a nutshell, it’s inflation that governments use to adjust their debt when it gets out of hand.

So, when paper currency devalues, hard assets by nature increase in price. Gold and silver are hard assets, that are easy to carry, and universally understood to be worth something. Corn crops and other commodities are also hard assets, but they’re not as easily transported as gold and silver. So, naturally, gold and silver for example because a “hedge” against governments devaluing their currency. That’s why gold has risen from $400 per oz, to over $1300 per oz over the past years. Our government has effectively devalued our currencies value by 2/3. The price for example of a gallon of gasoline priced in silver, or gold hasn’t changed in years, but in your paper currency, it’s gone from $1.00 in 1970 to $3.00 today.

So, consider some hard gold or silver for your own protection. Perhaps take 15% of your assets in gold or silver coins.