The Case for Real MoneyJohnathan Douglas
When the U.S. first started printing paper money, it was backed by gold. You could, quite literally, take a dollar bill, go to the bank, and exchange it for the equivalent in gold bullion. The bill was merely a symbol of the money’s true value.
Unfortunately, this is no longer the case. Paper money and gold are no longer correlated. Now, the value of the U.S. dollar is determined by a variety of other complex factors. And there are new currencies as well, such as Bitcoin, whose value is determined by even more complex factors.
However, amid all these different currencies, gold still remains the most reliable form of money. Here’s the case for including in your assets a supply of gold, the real money.
Cash and Inflation
A lot of people put their trust in cash. The stereotype is of someone, skeptical of the markets, banks, and traditional venues for keeping their savings, putting all their assets into cash and keeping it in their mattress. After all, stocks can fail. Even banks can fail. But cash will always be cash, and it will always have value.
This is true up to a point. Barring some major upset of our country’s economy, printed money will always have value. But that value is constantly decreasing. A century ago, a dollar could buy you a dress shirt, two pounds of steak, or ten pounds of sugar. Today, there’s very little that it will buy at all.
Even looking back at just 10 or 20 years ago, when you think of what you could buy for, say, $20, as opposed to how far it gets you now, the difference is pretty big. Another 20 years from now, it will be worth even less. So if you’re storing away cash, you’ll have a lot fewer buying options when you recover it than you did when you hid it away.
Bitcoin and Hacking
Rather than storing cash in a safe place, some people choose to go the opposite route. They put their assets into virtual money, such as bitcoin. It’s entirely digital, produced using a distributed network of computers that “mine” for it. It can’t be counterfeited, and even when the dollar drops in value, bitcoin can retain its worth.
You may also think that, because it’s not a physical currency, it can’t be stolen. There’s where you’d be wrong. There have been several instances over the year of bitcoin exchanges being hacked. Thieves can steal millions of dollars with a few keystrokes.
If your money is stolen from a bank, it’s insured by the FDIC, and you can recover it. But if someone hacks into the exchange where you keep your bitcoin, you can be wiped out. Or even if you aren’t actually a victim, when hacks occur, they tend to send the overall value of bitcoins down significantly, so you still suffer a loss.
The Advantages of Gold
As a real, physical asset (rather than just a symbolic asset, like cash), gold isn’t subject to inflation. It retains its buying power over time, so that, 20 years from now, you’ll still be able to make the same basic purchases with it that you can today.
Furthermore, as a physical asset, gold can’t be hacked. But what about theft? Couldn’t someone break in and steal your nest egg? If you kept it lying around the house, yes. But if you have a gold IRA, your gold is kept secure in an IRS-approved depository, where no one can touch it until you need it.
Most other forms of currency have inherent instabilities that can be exploited, causing you to lose your savings. But with gold, your assets are safe. That’s why it’s so important to invest a portion of your nest egg in gold and other precious metals. That way, if your other investments fail, you still have something to fall back on.