Since 1971, thanks to President Richard Nixon’s decoupling of gold from the Dollar, money has been transformed into worthless “Monopoly” paper. All of today’s paper currency is not backed up by anything but confidence. As long as there is confidence in this paper to serve as a medium of exchange, it will serve as money. As governments and central banks across the globe continue to pursue reckless fiscal and monetary policies, however, this confidence is being eroded. As a result, people are starting to look into alternative sources to store their wealth; the main reason for this is the abuse of the money supply (through excessive money printing) which causes inflation.
During the early years of the birth of the Unites States, whiskey was used as a medium of exchange and also a store of value. Whiskey was a highly desirable product and could be traded for almost anything. Although whiskey would most probably not be accepted as a medium of exchange today, the principle is the same, and there are fortunately other alternatives that we should be considering:
1) Precious metals have a long-standing tradition dating back thousands of years as store of value. Physical gold and silver can be easily accumulated and stored in a safe or vault. Since the year 2000, the price of gold and silver has increased approximately 580% and 608%, respectively. Although not as expensive as gold, silver also has many industrial uses, such as electronic components, solar panels, catalytic converters, etc.
2) Firearms and ammunition could be the new whiskey in North America. As the economic situation continues to deteriorate, expect people to become desperate and resort to crime. Also expect an increase in hunting (for food). If the situation gets really dire, guns and ammunition can be removed from the shelves of stores and controlled by the government in the spirit of “for your own security”, further restricting the firearm and ammunition supply. According to ammo.net, the price of an average round increased 224% since 1999.
3) Productive Farmland. Real-Estate valuations are always based on the intrinsic value of its land (what is produces). No matter what happens in this world, people will always need to eat, and therefore farmland will always have value. Furthermore, farmland historically keeps up with inflation. Residential and commercial real-estate, on the other hand, is slightly more complicated, as the underlying value is the ability to generate rent from individuals and corporations. If jobs are being lost, expect rents to decrease.
4) Rare Coins and Diamonds. While there are millions of ounces of gold and silver being extracted from the earth every year, there is a restricted supply of authentic rare gold coins that cannot be made anymore. Diamonds are also a good inflation hedge, and as an added bonus they can also be transported on your person to another country.
5) Essentials. If the price of consumer goods is expected to rise, than it makes sense to invest and stock up on things that you need in the future before they get too expensive. Here is a list of some essential items worth accumulating: toiletries, kitchen and cleaning supplies, canned food, dried foods, cooking oil, essentials for your home (light bulbs, filters, batteries), essentials for your car (filters, oil, spark plugs, tires), essentials for your animals (dried food), children (diapers). If the price of a box of diapers rises from $50 in the first year to $60 in the next, then that is a 20% return on investments in one year, tax-free. This is “the poor man’s way” of storing wealth, yet it should be applied at all levels of society to become more resilient.
Given that the currency you are holding in your bank account is depreciating rapidly, it is definitely worth devoting some time into researching the above alternatives and becoming informed on how you can hedge inflation and protect your wealth. Wallowing in inertia and not diversifying your wealth into hard assets can seriously reduce your purchasing power over the years to come.
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