Silver, Gold and Living By The Sword

Gary Christenson - Deviant Investor

It is said that, “If you live by the sword, you die by the sword.”  Let’s expand the concept and confirm that ancient bit of wisdom.

If you depend upon your sword for self-defense and aggression, you can reasonably expect that someday you will meet another swordsman who will slice your body and kill you.

If a country depends upon war and its military strength for conquest and intimidation, eventually the military and the country will be damaged and/or defeated via war.  There are many historical examples.

If central banks depend upon the creation of nearly unlimited quantities of debt and paper currencies, eventually the excess quantities of debt and paper currencies will result in the destruction of their economies and the credibility of those central banks.  There are many historical examples.

If corporations and governments depend upon lies and misrepresentations for market share and control, eventually they will be branded as untrustworthy and will lose their markets and control.

If large banks depend upon huge leverage and derivative contracts to generate trading profits, those banks may fail when another derivative meltdown occurs.

Pension plans and many individuals depend upon debt based paper investments for long term income, but that income is only as good as the counter-party issuing the debt, AND the credibility and purchasing power of the currency.  This thought should bring to mind the phrase “danger zone.”

However, if an individual, business, or government depends upon something that has real value, such as safely stored gold bullion or silver coins, then their risk is considerably reduced.  Consider the benefits of gold and silver:

a)   No counter-party risk.  Gold and silver are not dependent upon a government or bank for their value.

b)   Gold and silver are not currencies that can be printed to the point of hyperinflation.

c)    The “sword” of derivative failure is largely irrelevant if you hold your assets in gold and silver.

d)   The “sword” of currency devaluation will have little effect upon your precious metals investments and your savings.

e)   Your gold and silver will appreciate in nominal dollars, euros, and yen as people experience the devaluation of those dollars, euros, and yen.

f)     An ounce of gold is forever an ounce of gold, valued globally, and always exchangeable for food, gasoline, and clothing.

If you live by the “sword” of debt based paper currencies, you can reasonably expect detrimental consequences as the purchasing power and confidence in those paper currencies gradually dies.

However, if you live based on the continuing value of gold and silver, you should experience a safer and more secure financial future.  

Gold sold for about $42 in 1971 when President Nixon severed the connection between the dollar and gold.  The Dow Jones Industrial Average was about 900 in 1971, and gasoline sold for about 34 cents per gallon.  Times have changed, prices have increased, but an ounce of gold has retained its value, unlike the US dollar and most other paper currencies.

If you live by the sword, you die by the sword.  If you live with paper money, you will need much more as its purchasing power is diminished each year.  Consider the risks!

If you are one of the few who understands and trusts real money – gold and silver – then take advantage of the current low prices, politics, and continual “money printing”.  History is on your side in the ongoing conflict between unbacked debt based paper currencies and real gold.

You may also appreciate reading:

What Crude Oil Says About Silver

When Will the Fed Tighten?

Silver Keeps Chugging Along

$10,000 Gold. Possible?


GE Christenson

The Deviant Investor


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2 thoughts on “Silver, Gold and Living By The Sword

  1. LOL. The usual myths spread around by the religious gold bugs.

    a) “Gold has no counter-party risk” is a myth. Unless you store your gold yourself (in which case you run the risk of it being stolen or you being tortured until you tell where your gold is), you are running the counter-party risk of the storage facility (bank vault or whatever) not providing you with access to your gold. You are also running the risk of the government forcing the storage facility to provide your gold for government confiscation or forced exchange into fiat.

    b) Gold and silver aren’t currencies. They are money, but they aren’t used as a medium of exchange (modulo exotic cases like Iran selling oil for gold, which could very well be considered barter).

    c) and d) The “sword” of derivative failure is still hanging right above you, no matter whether you hold your assets in gold or not. It will result in a total economic breakdown. Your supermarket won’t be able to get food, so it won’t be able to sell it to you – no matter whether you are willing to pay with gold or with fiat. So, better pray that it doesn’t happen while you are still alive, because your gold isn’t going to save you from it.

    e) The price of everything fluctuates. Gold depreciated both in nominal and in inflation-adjusted dollars for more than two decades. In fact, in inflation-adjusted terms, the 1980 top in the price of gold was never reached, let alone exceeded. So, the claim that your gold and silver will appreciate in nominal dollar terms is a myth or a speculation at best.

    f) An ounce of gold is an ounce of gold – but the claim that it is always exchangable for food, gasoline and clothing is a myth. Try going into a convenience store and buying some food while paying with gold or silver. Most likely, the cashier will refuse and might even call the police. That doesn’t mean that gold isn’t money – you most probably won’t be able to pay with any foreign currency, either – but it does show that the claim that gold is always directly exchangable for goolds is blatantly false.

    I didn’t see you mention two other widespread myths about gold, so I am going to list them for you:

    g) “Gold is a hedge against inflation.” This is blatantly false even now. Not only there have been long periods of the price of gold in nominal terms declining while inflation being positive (and even rather high) but if you include the capital gains taxes you will realize that gold (or anything else you pay capital gains taxes on) does a rather poor job of protecting you from currency depreciation. Add to that the likelihood that in times of crisis the government will slap prohibitive taxes on gold sales, making it essentially impossible to sell your gold in legal ways.

    h) “Gold has intrinsic value.” Another widespread myth. NOTHING has “intrinsic value”. Value is always in the eye of the beholder; it is not an intrinsic property of anything. Value varies depending on the local preferences of the person doing the valuation.

    The truth is that gold is just an asset like everything else. It has rather unique properties which make it suitable for particular tasks (e.g., portfolio diversification) and it should be used for that purpose. Owning a bit of it is a very good idea. Trading it can be profitable, if you are good at trading, which most people aren’t. However, making a religion of owning it is a path to financial destruction.

    • Thanks for your comment. As usual I disagree with most of your “facts” and most of your interpretations. But I’ll post so others can read and evaluate on their own. It is a big world and opposing viewpoints are occasionally valuable.
      The Deviant Investor

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