Why Create A System Backed by Gold and Silver

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Gold and Silver Why Create A System
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Gold and Silver
Investors have long understood that Gold and
Silver are an excellent hedge against
inflation. Inflation is caused, in part, by the
excessive money printing by central banks. Gold
is scarce, costly to produce and comes in small
quantities. The analysis is straightforward and
we will break it all down to help you better
understand it all in a 2 Part post.
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How Inflation Works
Compare to the 400 growth in base money
engineered by the Federal Reserve since 2008 for
example, and its easy to see how a lot more
currency chasing a small amount of gold will
cause the dollar price of gold to rise over time,
and silver along with it. The basic idea that
land, gold, silver and art outlast and outperform
riskier assets such as stocks, bonds, and cash
seems sound when viewed from the perspective of
centuries, decades or years and not just a few
weeks and months. This may be difficult to grasp
for anyone who has been badgered with mantras
like...
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Protect Your Money
stocks for the long run by Wall Street
salesmen  who by the way are more concerned with
their commissions than their clients and by
the atrocious idea that hard assets like physical
gold and silver are very costly to own and
difficult to manage and liquidize. Yet stocks,
bonds, and even cash all involve some claim on a
third party and therefore contain credit risk in
addition to whatever market risk they embed. The
investor is always at the mercy of the issuer.
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Gold and Silver Lasts
Companies eventually go bankrupt. Bonds
eventually default. Every paper currency in the
history of the world has eventually proved
worthless and there is little reason to believe
the reigning paper money champions such as the
dollar, euro or yen will prove different in the
fullness of time. In contrast, the value of gold
and silver is intrinsic. If you own it, you own
it. There is no issuer who can suddenly make your
gold and silver into confetti.  Even Janet
Yellen, Chair of the Board of Governors of the
Federal Reserve, said that...
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Stealing Growth
If you look at what is happening economically
nowadays, you realize that many central banks
around the world have adopted a close to zero,
zero and even a negative interest rate policy to
obtain a devalued currency in order  to
stimulate their economy, because when you have
a devalued currency your exports get inexpensive,
allowing more currency to flow into the country
creating growth. However, these policies dont
create real growth, they just steal it such
growth is created only temporarily from trading
partners until the trading partners steal it back
with their own currency devaluations.  
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Inflation Equation
And most importantly, such policies constitutes
massive theft from currency savers and forces
retirees into inappropriate risk investments such
as the stock market. When applying a normalized
interest rate of about 2 to the entire savings
pool in the U.S. banking system for example,
compared to the actual rate of zero, reveals a
400 billion per year wealth transfer from savers
to the banks. This has continued for five
years, so the cumulative subsidy to the banking
system at the expense of everyday Americans is
now over 2 trillion.  But that is just one part
of the equation, because people tend to ignore
inflation when deciding if they are better off.   
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Example Inflation
Here is an Example Assume you are a software
engineer working for a high-tech company making
100,000 per year. You get a 2 raise, so now
you are making 102,000 per year. Most people
would say they are better off after the raise.
But if inflation is 3, the 102,000 salary is
worth only 98,940 in purchasing power relative
to where you started. You got a 2,000 raise in
nominal terms but you suffered a 1,060 pay cut
in real terms.  
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The Wrap Up
Several experiments by behaviorists show that
people think a 2 cut in wages with no change in
the price level is unfair. Meanwhile, they
think a 2 raise with 4 inflation is fair. In
fact the two outcomes are economically identical
in terms of purchasing power. However, the
reality that people prefer a raise over a pay cut
while ignoring inflation is the essence of not
understanding how the economic system really
works. Read full post www.golvercard.com/blog/2
015/4/7/gold-and-silver-backed-system
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GolverCard Explainer Video
GolverCard is an innovative savings and payment
system backed by gold silver. We offer the
benefits of the precious metals industry through
gold and silver, with all the advantages of the
banking industry. Watch Our Explainer Video!