In the age of fiat currency, the distinct concepts of saving and investing have become conflated and confused. Saving is producing more than you consume and then setting it the difference aside.
Investing is allocating capital to a productive business to create more wealth. Investing has more risk—and potential reward—than saving. Today, however, what most people think of as saving is actually investing.
That’s because most people take the excess of their production over consumption and put it into the stock or bond market. Most people understand that it’s not optimal to simply hold fiat currency, which the central banks continuously debase. So they put their money into other assets, primarily bonds and stocks.
In other words, fiat currency and inflation have ruined saving for most people. It has forced them further down the risk curve into stocks, bonds, and other investments in a struggle to maintain their purchasing power. However, there is no guarantee those investments will even keep up with inflation. But suppose they do. They will then be subject to a capital gains tax, even if it’s only a nominal gain, not a real one.
That means savers face the daunting task of not only keeping up with inflation but also outpacing the capital gains tax on the nominal gain just to maintain their purchasing power. That’s made saving an impossible task for most. Before the era of easy-to-produce fiat currency, people could simply save in money, which was either gold or a derivation of it.
There was no need for a dentist, construction worker, or taxi driver also to become a hedge fund manager to try to keep their head above water. That’s how the fiat era monetized stocks, bonds, real estate, and other assets that wouldn’t have otherwise been.
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For example, 50 years ago, the market cap of all the gold in the world was roughly equal to the market cap of all the stocks in the world. Today, the market cap of gold is about 10% of the world’s equities. It’s an indication of how capital that used to be allocated to saving in gold became allocated to the stock market instead.
That doesn’t mean there isn’t a legitimate place for stocks, bonds, and real estate—there certainly is. It’s just that people would use them for investing—or, in the case of real estate, its utility value—and not as savings vehicles. Bonds in general and Treasuries in particular, became the “go-to” savings vehicles to store wealth in the fiat era.
However, I think that will change soon as bonds will be incapable of storing value in the face of financial repression. With 2022 being the worst year for Treasuries in American history, the shift away from bonds has probably already begun. That means a lot of the capital parked in bonds will be looking for a new home that functions as a better store of value.
Gold: Make Saving Great Again
Gold has been mankind’s most enduring store-of-value asset because of its unique characteristics. Gold is durable, divisible, consistent, convenient, scarce, and most importantly, the “hardest” of all physical commodities.
In other words, gold is the one physical commodity that is the “hardest to produce” (relative to existing stockpiles) and, therefore, the most resistant to debasement.
Gold is indestructible, and its stockpiles have built up over thousands of years. That’s a big reason why the new annual gold supply growth—typically 1-2% per year—is insignificant.
In other words, nobody can arbitrarily inflate the supply. That makes gold an excellent store of value and gives the yellow metal its superior monetary properties.
People in every country of the world value gold. Its worth doesn’t depend on any government or any counterparty at all. Gold has always been an inherently international and politically neutral asset. This is why different civilizations worldwide have used gold to store value for millennia.
From a historical point of view, using government bonds as a savings vehicle is a relatively new concept. As it fades, I expect people will rediscover the world’s premier store-of-value asset: gold.
It’s already starting to happen in a big way… Last year, central banks bought roughly 37 million ounces of gold—a multi-decade record.
It’s no coincidence that the worst year ever for US Treasuries also saw the highest central bank gold buying spree in over 55 years.
As Treasuries’ political and debasement risks rise, nobody should be surprised that demand for gold is skyrocketing. I expect this trend to accelerate.
Instead of parking their savings in Treasuries, people, companies, and countries will increasingly park their savings in gold. We are already seeing that with central banks. So far this year, central banks have bought about 25% of worldwide gold production.
China is one of the biggest gold buyers. China has dumped over 25% of its massive stash of Treasuries since 2021. At the same time, China has bought vast amounts of gold—five million ounces since last November, or nearly $10 billion.
Observation #9: Gold is the top store-of-value alternative to Treasuries. As demand for Treasuries falls, demand for gold will soar.
Central banks and governments are the largest individual holders of gold in the world. Together they own over 1.1 billion troy ounces of gold out of the 6.8 billion ounces humans have mined over thousands of years.
And those are just the official numbers that governments report. The actual gold holdings could be much higher because governments are often opaque about their gold, which they consider a crucial part of their economic security.
Russia and China—the US’ top geopolitical rivals—have been the biggest gold buyers over the last two decades. It’s no secret that China has been stashing away as much gold as possible for many years.
China is the world’s largest producer and buyer of gold. Russia is number two. Most of that gold finds its way into the Chinese and Russian government’s coffers.
As the trend of financial repression unfolds, I expect central banks to accelerate their Treasury sales and gold purchases.
Conclusion
Here is the investment thesis for gold:
- Observation #1: The US government can’t repay its debt. Default is inevitable.
- Observation #2: It will not be an explicit default.
- Observation #3: The debt will continue to grow at an accelerating pace.
- Observation #4: Foreigners are not buying as many Treasuries.
- Observation #5: The US government cannot allow interest rates to rise much further.
- Observation #6: The Federal Reserve is the only big buyer of Treasuries stepping up, which means currency debasement.
- Observation #7: The US government will use financial repression to debase the currency in a controlled fashion, though it could spiral into out-of-control inflation.
- Observation #8: Treasuries will no longer be the “go-to” store-of-value asset as people look for alternatives.
- Observation #9: Gold is the top store-of-value alternative to Treasuries. As demand for Treasuries falls, demand for gold will soar.
In short, we are on the verge of a paradigm shift in international finance as gold replaces Treasuries as the world’s premier store-of-value asset.
Article cross-posted from International Man.
The last time the international monetary system experienced a paradigm shift of this magnitude was in 1971. Then, gold skyrocketed from $35 per ounce to $850 in 1980—a gain of over 2,300% or more than 24x.
I expect the percentage rise in the price of gold to be at least as significant as it was during the last paradigm shift.
That’s because this coming gold bull market could be fundamentally different than other cyclical bull markets. It will be riding the wave of a powerful trend: the re-monetization of gold as the king store-of-value asset. It could lead to the biggest gold bull market ever.
While this megatrend is already well underway, I believe the most significant gains are still ahead. That’s precisely why I just released an urgent report on where this is all headed and what you can do about it… including three strategies everyone needs today. Click here to download the PDF now.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
