The most common thing about gold is that it hedges or protects against inflation. In addition to protecting purchasing power from inflation, gold can also protect assets from the risks of intermediaries and, in the extreme, even tyranny. This article explains why gold* and other precious metals protect against inflation, intermediary risk and tyranny.
*(The term “gold” will be used to refer to precious metals)
What is Inflation?
How does gold protect against inflation?
The 1913 price of 1 ounce of gold was a fixed price of $20.67. Check the current gold price. Right now the price of gold is $1806.78. If gold had only kept pace with inflation, the current price would be $618.59. Overall, the price of gold outpaced inflation by almost three to one and protected purchasing power.
Inevitably, over the past century there have been periods when inflation has outpaced gold. People looking at the short term may see these irregular periods as a reason to avoid gold. However, inflation calculations are worse in the long run and gold calculations get better over time. Investors with the longest time horizon tend to do best. Holding gold for a year or two can provide some short-term inflation protection, but holding gold is best as a medium-term or multigenerational strategy.
What is intermediate risk?
Intermediary risk describes any intermediary or separative unit in a transaction, process or access to your money. Intermediary risk abounds in the financial sector. Virtually every investment vehicle carries intermediary risk. For example, many people hold most of their wealth in retirement accounts. There are many advantages to having a custodian to manage the retirement account, but what if there is an emergency and the money is needed quickly? Accessing funds involves contacting the custodian, completing the appropriate paperwork, waiting for the custodian to process it, and then dreading tax day. Some companies are better than others, but the process usually takes longer than a week or two before a check arrives.
One of the most important intermediary risks is that of the banks. Banks are a convenient way to store money. Still, it’s not hard to visualize different scenarios where someone could lose access to their money. Maybe a storm brings down a transformer outside normal business hours and there is no electricity or internet. The ATM would not work. Online banking would not be an option, nor would credit cards. An internet hacker could either compromise banking software or take accounts hostage. An act of terrorism could destroy the bank. The bank could become insolvent and depositors should file a claim with the FDIC.
How does gold protect against intermediate risk?
Holding physical gold and cash is a prudent strategy to avoid intermediary risk. Cash is convenient but carries harder to see but greater middleman risk. The Federal Reserve is the intermediary of cash risk, even held at home. Fiat currencies only have value because people collectively agree that they are valuable. However, the Federal Reserve continues to print and devalue money every day. They couldn’t print more gold.
Physical gold is better to have and not need than to need and not have. This is exactly how insurance works. People buy insurance hoping they’ll never need it, but if an emergency does arise, they’re glad they did. Holding gold and other precious metals is insurance against intermediary risk.
What is tyranny?
Tyranny is an arbitrary or unrestrained exercise of power. Tyranny quickly becomes a system of total control and is the antithesis of freedom and free choice. The very reason the Declaration of Independence was written and America came into being was to get rid of the tyranny and oppression of an authoritarian British government. The goal was to secure everyone’s right to life, liberty and the pursuit of happiness. The pursuit of happiness was originally understood as the pursuit of property.
When the settlers drafted the Constitution, anti-federalists saw the dangers of a new government becoming too powerful and turning into the albatrosses they had just fought to win freedom. Unless the framers added some individual protections, they refused to sign the Constitution. These protections are commonly referred to as the Bill of Rights. Fortunately, they had the logic and foresight to place these protections for life, liberty and property. The three ideas are intimately linked and philosophically synonymous.
It is wise to establish protections for individual and societal liberty. Government tyranny can take many forms, but many people have come to believe that it is funded and enforced through the tax code. Hammers see everything as a nail. The tax code can be seen as a government hammer, so all your wealth looks like a nail to the government. The borrower becomes indebted to the lender. The larger the debt, the stricter the enforcement must be. Reckless spending can be as tyrannical but more dubious than door knocking on the Gestapo to seize property. The wards against tyranny are bulwarks against those who come to rob, kill and destroy. Gold is a financial bulwark.
How does gold protect against tyranny?
First, an invisible target is difficult to hit. Buying gold from the US Gold Bureau is a private transaction. After purchasing precious metals from the US Gold Bureau, it is up to you what to do with your coins or bullion. If you hide your wealth in the form of physical gold in your home, the only people who will know you have it will be those you tell about it.
Second, there is the “golden rule”. The “golden rule” says that “he who has the gold makes the rules”. Without gold and other valuables, you probably won’t be the one making the rules in an emergency. Suppose tyranny is the lack of choice to do otherwise. In this case, an element of freedom is choosing the best way to live for you and your family. If a time comes when tough choices have to be made, you’ll want leveraged gold deals.
Third, gold is considered independent of money. Currency independent means it has value everywhere and can easily be converted to any local currency. Whether you want to live abroad or something has happened to the dollar, gold’s independent status makes it easy to buy the new currency. The currency-agnostic status allows people to have global location choices not offered by money. Some countries will not accept US dollars, but gold is accepted everywhere.
Fourth, gold was always the target of tyranny when the United States made it illegal to own gold in 1933. However, certain types of gold like numismatics and collectibles were exempt from confiscation. Section 2(b) provides an exemption for “gold coins of recognized special value to collectors of rare and unusual coins”.
How to buy gold
Buying gold from the US Gold Bureau is simple, safe and private. Transactions can be done over the phone with the help and training of one of our precious metals experts or online.
The US Gold Bureau has been in operation since 2003 and under current management since 2008. The US Gold Bureau is one of the largest companies in the country. Hundreds of thousands of Americans trust us as the leader in the precious metals industry. The US Gold Bureau is proud to offer the best buy-back guarantee in the industry. Whatever you buy at the US Gold Bureau, we guarantee to buy it back. The US Gold Bureau is the largest wholesale buyer of the US Mint. We are proud to be the company chosen by the Great State of Texas to manage and operate the Texas Bullion Depository.
Protect yourself from inflation, intermediary risk and tyranny today.
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