Why is silver and gold a good insurance policy
I just received a question from an interested investor asking; why do I and others say that one of the main reasons for buying silver and gold is as an "Insurance policy". I received this question at about the same time as I read a "STUPID" article about how gold has "Lost some of it's Value".
I say "Stupid", because too many people look at silver and gold incorrectly. I've had people, including my wife, ask me: "Why do you BUY Silver and Gold". The real truth is; you're NOT BUYING Silver and Gold. When you purchase something, you are buying a product or service; which is finite and temporary. For instance, you BUY Food, Clothes, Cars, computers, cell phones, etc. You're buying a PRODUCT which in time, WILL be gone, and you'll have to buy a REPLACEMENT. In other words, you don't get back what you spent on it. You get to use the product for necessity, convenience, luxury, etc. Same with a service. You BUY a ticket to a movie, airplane ride, labor to build you a fence, etc. You are paying for a service that is temporary. If you want more, you have to pay for it again.
Now asking "Why do you INVEST in Silver and Gold", is a more accurate question. But even that is pushing the limit of definition. Investing, usually implies the goal of making a profit.
Now, before anyone freaks out and says I am just speaking "semantics", I concede that for some, that is true. But the real truth is, you're NOT BUYING Silver and/or Gold. You're simply EXCHANGING means of value. If I went to the bank and exchanged $100 US Dollars for the equal amount of the Euro or Yen, did I actually BUY SOMETHING? No, I EXCHANGED it. That's why at the air port it says "Currency EXCHANGE". Well, once people realize that Silver and Gold are the same, "BUT BETTER", as currency and money, then they'll realize that you are simply EXCHANGING Dollars, Euros, Yen, etc... for Silver and/or Gold. Minus any "Convenient Charges", you can turn around a week later and EXCHANGE it back again for the other currency you started with. You CAN'T DO THAT with a gallon of milk or a pair of pants you wore for a month.
OK, so where does the INSURANCE POLICY part of this come in? Silver and Gold HOLD THEIR VALUE over time. This is the "Insurance" part. I'm not speaking of the "Change" in price day to day. I'm talking about it's "VALUE" and it's "BUYING POWER" over time. That same ounce of gold will basically buy you the same thing today, that it bought you 100 years ago or a 1000 years ago. A really nice suit, today, will cost you between $1200-$1500. Even as high as $4500. But that's the extreme. We're not talking JC Penny or Walmart or JOsBanks. we're speaking of a "REAL SUIT". That price, is about the value of a 1 ounce gold coin. 100 years ago, a really nice suit would cost you about that same 1 ounce gold coin. Same with an acre of land. Today, an average acre of land; not in Manhattan or similar; will cost about $1200-$1500.
Same with Silver. In the 1960's a gallon of gas was about $0.25. Today, you can STILL buy a gallon of gas for a $0.25. IF that quarter was a 1964 or older silver quarter. (Today, worth about $3). 100+ years ago, an ounce of silver could buy you a very nice dinner. Today, an ounce of silver can still buy you a really nice dinner. Not the extremes, but also not going to McDonalds either.
Now there are some that will point out the change in gold and silver prices over the last 10 years. People have to realize that the 1900's has been a very different world from before that. In the 1930's, the US President stopped allowing private individuals from owning gold. In 1974 the United States took their economy off of the gold standard. For the last 40 years, Silver and Gold have been heavily manipulated. If there was a total economic crash with the dollar or other factor, gold could be worth $10,000 and Silver $300. That too would be an abnormal extreme. You have to look at the VALUE of Silver and Gold when compared to an AVERAGE prosperous economy. No hyperinflation, deflation, or recession.
This is why silver and gold are great as an "Insurance Policy". Because when hyperinflation happens or the dollar crashes, and a gallon of gas costs $10 a gallon, Silver will probably be worth around $40-$50 an ounce. That 1964 quarter will be worth about $8-$10. That same quarter that could buy a gallon of gas in the 1960's will still be able to buy you the gallon of gas. Given enough time, that $10 a gallon for gas would make the suit and other goods you buy go up in price too. But again, remember we are in a very manipulative world today. Not only is the government, central banks, and corporations manipulating the price of silver and gold, they manipulate the price of everything. If gas goes to $10 a gallon, how much of that increase is because of the price of crude oil and how much because the government RAISED their taxes. How about import/export taxes? Unemployment? Welfare and other social programs giving "Freebies" to no contributors? Etc.
The point is, in today's times, we can't compare DOLLAR FOR DOLLAR the value of silver and gold vs 100-1000 years ago. BUT, we can see that the relationship is still there. The "VALUE" of silver and gold is still "LEGITIMATE". And no matter what happens with the economies, currencies, etc. the "VALUE" of silver and gold will still be there. This is why you should own some. To preserve the value of your wealth. So you don't have to sell possessions, 401k, IRA, etc. to survive on.
And as I've always said; the best part of THIS TYPE OF INSURANCE POLICY..... Is if for some reason you never need it; if the economy never crashes; if currencies stay strong; etc... You DON'T LOSE YOUR INSURANCE PRINCIPAL. Silver and Gold will always be worth something. And if the economy got so good that gold was equal to $700 again; and Silver was $10 again; you still haven't lost. That one ounce will still have the same buying power that it has today, a year ago, 100 years ago, or 1000 years ago.
So don't every consider yourself BUYING Silver or Gold. You can look at it as "INVESTING" if making a profit is your goal. (Which HAS been my goal some times). But if you're wanting silver and gold for preserving your wealth; preserving buying power; and as a hedge against inflation or economic/currency turmoil; think of it as what it truly is..... "EXCHANGING" your dollars for a DIFFERENT form of money or currency. It will still be there tomorrow, next year, or 20 years from now if you leave it to your kids. That's the difference between BUYING something and EXCHANGING. You DON'T BUY Silver and Gold.
CYA: SE:
I say "Stupid", because too many people look at silver and gold incorrectly. I've had people, including my wife, ask me: "Why do you BUY Silver and Gold". The real truth is; you're NOT BUYING Silver and Gold. When you purchase something, you are buying a product or service; which is finite and temporary. For instance, you BUY Food, Clothes, Cars, computers, cell phones, etc. You're buying a PRODUCT which in time, WILL be gone, and you'll have to buy a REPLACEMENT. In other words, you don't get back what you spent on it. You get to use the product for necessity, convenience, luxury, etc. Same with a service. You BUY a ticket to a movie, airplane ride, labor to build you a fence, etc. You are paying for a service that is temporary. If you want more, you have to pay for it again.
Now asking "Why do you INVEST in Silver and Gold", is a more accurate question. But even that is pushing the limit of definition. Investing, usually implies the goal of making a profit.
Now, before anyone freaks out and says I am just speaking "semantics", I concede that for some, that is true. But the real truth is, you're NOT BUYING Silver and/or Gold. You're simply EXCHANGING means of value. If I went to the bank and exchanged $100 US Dollars for the equal amount of the Euro or Yen, did I actually BUY SOMETHING? No, I EXCHANGED it. That's why at the air port it says "Currency EXCHANGE". Well, once people realize that Silver and Gold are the same, "BUT BETTER", as currency and money, then they'll realize that you are simply EXCHANGING Dollars, Euros, Yen, etc... for Silver and/or Gold. Minus any "Convenient Charges", you can turn around a week later and EXCHANGE it back again for the other currency you started with. You CAN'T DO THAT with a gallon of milk or a pair of pants you wore for a month.
OK, so where does the INSURANCE POLICY part of this come in? Silver and Gold HOLD THEIR VALUE over time. This is the "Insurance" part. I'm not speaking of the "Change" in price day to day. I'm talking about it's "VALUE" and it's "BUYING POWER" over time. That same ounce of gold will basically buy you the same thing today, that it bought you 100 years ago or a 1000 years ago. A really nice suit, today, will cost you between $1200-$1500. Even as high as $4500. But that's the extreme. We're not talking JC Penny or Walmart or JOsBanks. we're speaking of a "REAL SUIT". That price, is about the value of a 1 ounce gold coin. 100 years ago, a really nice suit would cost you about that same 1 ounce gold coin. Same with an acre of land. Today, an average acre of land; not in Manhattan or similar; will cost about $1200-$1500.
Same with Silver. In the 1960's a gallon of gas was about $0.25. Today, you can STILL buy a gallon of gas for a $0.25. IF that quarter was a 1964 or older silver quarter. (Today, worth about $3). 100+ years ago, an ounce of silver could buy you a very nice dinner. Today, an ounce of silver can still buy you a really nice dinner. Not the extremes, but also not going to McDonalds either.
Now there are some that will point out the change in gold and silver prices over the last 10 years. People have to realize that the 1900's has been a very different world from before that. In the 1930's, the US President stopped allowing private individuals from owning gold. In 1974 the United States took their economy off of the gold standard. For the last 40 years, Silver and Gold have been heavily manipulated. If there was a total economic crash with the dollar or other factor, gold could be worth $10,000 and Silver $300. That too would be an abnormal extreme. You have to look at the VALUE of Silver and Gold when compared to an AVERAGE prosperous economy. No hyperinflation, deflation, or recession.
This is why silver and gold are great as an "Insurance Policy". Because when hyperinflation happens or the dollar crashes, and a gallon of gas costs $10 a gallon, Silver will probably be worth around $40-$50 an ounce. That 1964 quarter will be worth about $8-$10. That same quarter that could buy a gallon of gas in the 1960's will still be able to buy you the gallon of gas. Given enough time, that $10 a gallon for gas would make the suit and other goods you buy go up in price too. But again, remember we are in a very manipulative world today. Not only is the government, central banks, and corporations manipulating the price of silver and gold, they manipulate the price of everything. If gas goes to $10 a gallon, how much of that increase is because of the price of crude oil and how much because the government RAISED their taxes. How about import/export taxes? Unemployment? Welfare and other social programs giving "Freebies" to no contributors? Etc.
The point is, in today's times, we can't compare DOLLAR FOR DOLLAR the value of silver and gold vs 100-1000 years ago. BUT, we can see that the relationship is still there. The "VALUE" of silver and gold is still "LEGITIMATE". And no matter what happens with the economies, currencies, etc. the "VALUE" of silver and gold will still be there. This is why you should own some. To preserve the value of your wealth. So you don't have to sell possessions, 401k, IRA, etc. to survive on.
And as I've always said; the best part of THIS TYPE OF INSURANCE POLICY..... Is if for some reason you never need it; if the economy never crashes; if currencies stay strong; etc... You DON'T LOSE YOUR INSURANCE PRINCIPAL. Silver and Gold will always be worth something. And if the economy got so good that gold was equal to $700 again; and Silver was $10 again; you still haven't lost. That one ounce will still have the same buying power that it has today, a year ago, 100 years ago, or 1000 years ago.
So don't every consider yourself BUYING Silver or Gold. You can look at it as "INVESTING" if making a profit is your goal. (Which HAS been my goal some times). But if you're wanting silver and gold for preserving your wealth; preserving buying power; and as a hedge against inflation or economic/currency turmoil; think of it as what it truly is..... "EXCHANGING" your dollars for a DIFFERENT form of money or currency. It will still be there tomorrow, next year, or 20 years from now if you leave it to your kids. That's the difference between BUYING something and EXCHANGING. You DON'T BUY Silver and Gold.
CYA: SE:
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