“Because gold is honest money, it is disliked by dishonest men” – Ron Paul.
Here is part 1. https://steemit.com/writing/@bulliontraderuk/understanding-real-money-and-how-it-is-relevant-in-our-world-part-1
To get the whole story please read it before part 2.
In part 1 we discovered that it is wiser to measure our security from gold and silver's perspective than from our currencies perspective.
Storms.
You are the captain of your vessel and your family are the crew. Most maritime captains check the weather before leaving port and most won’t leave the safety of port or a bay if a severe storm is approaching. When there are severe storms most vessels out at sea seek the shelter of a bay or port.
There will always be storms, some more violent than others, so when they come it’s in your best interest to steer your currency vessel to seek the shelter of a bay or port where you can anchor/tether to the land mass which doesn’t move. The storm will still rage but your vessel will be protected by the land mass.
Since 2007 the incidents of financial storms have increased - and will continue to increase - and they are getting more violent. Unfortunately, these storms will affect you because you live on a currency vessel. No storm is created by vessels on the ocean, but the vessels are most certainly affected by them. You will get a bigger currency vessel as you accumulate more US dollars, UK sterling, Japanese yen, but it will still be affected by a storm and you’ll just have more to lose should your vessel go down.
Types of storms (none of them your doing).
- Currency devaluation. As all currencies are floating they are susceptible to devaluing against one another. A good example of this occurred in South Africa in Dec 2015. A political event caused the local currency to devalue substantially against the USD, GBP etc. Overnight holders of South African rand suddenly needed more of the local currency to purchase anything priced in USD. How did this affect a South African currency vessel? Overnight the price of oil increased dramatically, since oil is priced in USD. Now the price of petrol or diesel needed to power the South African vessel is more expensive. A consequence of the increased petrol price is more expensive food, since everything is transported from the farmers to the supermarkets using fuel. Now it becomes more expensive to feed the vessel's captain and crew. It is highly unlikely these extra expenses would be covered by any annual salary increase the South African vessel's crew would get.
- Inflation or Hyperinflation. All countries have inflation, some just more than others. Inflation is basically the slow erosion of your currencie's purchasing power, unless of course you live in South Sudan or Venezuela (with 470% each), Suriname (60%), Angola (34%) to name a few. A Venezuelan resident would find prices increasing by 470% in one year. Good luck trying to survive in that.
- Bank bail-in. You have worked hard and managed to save a substantial amount of your currency in your bank account. Your currency vessel is healthy, the sun is shining and life is good. One morning you wake up to find that you can’t access your bank account and you learn that all funds in your account have been frozen as the bank has gone bust. All your savings along with everyone else’s will be used to bail out the bank. Your country doesn’t have a national protection scheme in place so all your savings are now gone. It can’t happen here? We are sure the citizens of Cyprus thought the same in 2014.
- Government policy. You and your crew decided to accumulate your savings under your mattress as you don’t trust the banks (that’s probably very prudent considering what’s been going on over the last decade). However, you wake up one morning to learn that your government has declared certain currency notes “no longer legal tender” to combat “tax evasion etc.” Now you are forced to deposit those notes into the banking system and be subject to all its pitfalls. India experienced this in November 2016 and considering 75% of the population don’t have bank accounts and never have, as well as being a predominantly cash based economy, this is a major blow to an Indian Rupee vessel.
- Pension benefits substantially reduced. You’ve paid into a pension plan your entire working life, but your pension provider can’t make sufficient return on its investments so your pension benefits will be substantially cut, the alternative is the pension provider goes bust and you lose all your benefits. This never happened 20 years ago but it is now becoming more prevalent. Don’t think it can happen to you? I’m sure state pension beneficiaries in Detroit and San Jose didn’t think so either.
As stormier seas approach, it isn’t a good idea to keep all your US dollars, UK sterling, Japanese yen in your vessel. If it sinks everything you have accumulated from your hard work will likely end up at the bottom of the ocean. You will survive and your crew will survive but you will need to rebuild your reserves on another currency vessel which will again be subject to the aforementioned storms.
Perhaps a good strategy is to lighten your currency vessel by converting some of your excess (savings) US dollars, UK sterling, Japanese yen into gold and silver. This will automatically be separated from your currency vessel. If your vessel goes down, you still have the protection and security of your gold and silver to fall back on.
This is the reason it is incorrect to view gold and silver’s worth in terms of a currency (which is always changing, sometimes even failing, only to be replaced by another). Gold and silver are more than an alternative form of your currency.
- It protects the purchasing power of all currencies and is an excellent store of value from the moment you purchase it.
- It is not able to be printed at will, like any currency which dilutes its purchasing power and can lead to massive inflation or hyperinflation.
- It has stood the test of time. How many currencies from 100 years ago are still used today?
- It is recognised the world over and can be converted into any currency in the world easily, should you need to spend a little of it. Try converting a Zimbabwean dollar or Venezeulan bolivar into any meaningful amount, say USD 100.00.
- It is outside of the banking system and isn’t owned by anyone except the holder.
- It is very simple and easy to purchase and sell, should you need a little currency to spend.
Head to our education centre to learn more about this very valuable and versatile real money.
Take control of your future, it’s easier than you think and you won’t regret it.