The Most Important Insurance We Never Buy
The Most Important Insurance We Never Buy
By Len Penzo
It’s ironic, but bankers and fiscally irresponsible governments despise gold and silver. Why? Because precious metals demand accountability, that’s why.
In short, gold-backed currencies force responsible governments to live within their means.
That is precisely why, back in 1971, Richard Nixon was forced to nullify the Bretton Woods agreement, which was signed at the end of World War II, and permanently close the gold window.
As you might expect, Nixon felt he had no choice. The US had been living well beyond its means for more than a decade, printing lots of federal reserve notes to pay for expensive endeavors the country couldn’t truly afford, like the Vietnam War and LBJ’s so-called “War on Poverty.”
That, in turn, led to an increasingly devalued US dollar. So, in order to preserve their wealth, many of the world’s central banks — led by West Germany, France and Switzerland — began redeeming their rapidly depreciating US dollars for the gold stored in Fort Knox; so much so that by the time 1971 rolled around, America had only half the gold reserves it did in 1960.
In fact, it’s been said that the gold outflow was so rapid, if it continued, America’s gold reserves would have been completely consumed within a few more years.
Of course, instead of closing the gold window and abandoning Bretton Woods, the US could have simply scaled back its spending — but that’s what happens when critical financial decisions are left to profligate politicians and their complicit central bankers.
Since abandoning its ties to gold in 1971, America has greatly expanded the size of the federal government, destroying the dollar’s utility as a store of value in the process — so much so that it takes $615 today to buy the same basket of goods and services that $100 would fetch in 1971.
The bad news is, savers, retirees and other folks on fixed incomes depend on their currency to hold its value; and if currencies depreciate too quickly, it leads to lower living standards — for almost everyone.
Over the past decade, the Fed’s printing presses have conjured more than $4 trillion in new money out of thin air — and that doesn’t bode well for the US dollar’s value and continued confidence in its future.
Unlike paper money, precious metals can’t be created out of thin air, and that makes them proven instruments of wealth protection; it’s why some people choose to keep a portion of their savings in gold and silver.
How Secure Are They?
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