The statisticians tell you inflation is back to acceptable levels. And yet prices are up double digits in three years. The cognitive dissonance is causing political anguish all over the world.
In Europe, they’re even back to electing right wing politicians in response to inflation. It’s like déjà vu all over again.
In the US, the cost of living has become a joke…literally:
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| Source: @SallyMayweather |
The Japanese have chosen a monetary hard-liner as their next Prime Minister, causing stocks to crash 4% in a single day.
Here in Australia, the central bank still isn’t tempted to cut rates, only adding mortgage agony to the pain of high prices.
But for a select group of people, the cost of living is actually crashing.
Today, I’ll reveal their secret to you: the Solomonic Gold.
The gold standard is just a political promise
In 1971, President Nixon closed the gold window. Like all government programs, it was a temporary measure (that’s still in place today). But it removed the last link between money and gold.
Over the next few decades, the US dollar lost almost all its value against gold. And consumer prices went berserk.
The old adage that only gold can keep a politician honest was proven once again. Given the power to print money, our leaders simply cannot help themselves.
But being on a gold standard alone isn’t enough to prevent inflationary episodes. The history of gold standards is a long and sordid tale of debasements and devaluations. And that story continues today.
Zimbabwe has a gold backed currency. And yet, the BBC reports how this plays out in political reality:
‘Zimbabwe’s central bank has devalued its gold-backed currency by over 40% against the US dollar, indicating that the last ditch effort to stabilise the country’s volatile economy, is in trouble.
‘The Zig, which stands for Zimbabwe Gold, was launched over six months ago and is the country’s sixth currency in 25 years.’
Ghana’s vice president has plans to back the country’s currency with gold, too. Think it’ll last?
No, in other words, the gold standard is no better than a political promise.
But what’s the alternative? How can you access the benefits of a gold standard without having to rely on politicians to remain true to it?
It’s time to create your own “gold standard”
All you need to do to escape inflation is buy gold. It’s that simple – one transaction.
Here’s how it works…
In 2016 BullionStar did the maths for the preceding 500 years. It concluded that gold’s purchasing power is volatile in the short term, but remarkably stable over the long term:
‘[…] while there is no exact constant in economics, the stability of gold’s purchasing power is unprecedented. Not only on a gold standard the metal shows it’s constant nature, but also off the gold standard gold’s purchasing power is remarkably constant, albeit more volatile in the short term.’
This in stark contrast to the fiat money system, which has crashed in value over time. About 300 years ago, the gold price set by Sir Isaac Newton as Master of the Mint was about £4.30. Today, the gold price is around £2,000.
In case you don’t believe inflation statistics going back 500 years, like me, consider this comparison from Doug Casey of Casey Research in 2009.
He uses US dollars and silver instead of gold for some of the analysis because it was the currency for common use, historically speaking. But the extraordinary stability of both over long periods of time is obvious:
‘Gold’s primary purpose is to preserve your purchasing power. Whether it be roaring inflation, or dollar debasement, or economic upheaval, or out-of-control government spending, it has been the absolute best form of protection throughout the history of mankind. And I can prove it.
‘1979: Gold’s average price that year was $306.68. This bought an average-priced full size bed.
‘30 years later, $950 would still buy you a full size bed.
‘Time of Christ: Under the Roman Empire, an ounce of gold purchased a Roman citizen his toga (suit), a leather belt, and a pair of sandals.
‘Today, one ounce of gold will still buy a man a suit, a leather belt, and a pair of shoes.
‘400 BC: Some scholars report that during the reign of King Nebuchadnezzar, an ounce of gold bought 350 loaves of bread.
‘Today, an ounce of gold still buys about 350 loaves ($950 divided by 350 = $2.73/loaf).’
Casey’s list goes on and on. Right back to King Solomon buying horses 1000 BC. But I’m sure you get the idea.
Here’s a more recent example from my friend and fellow Australian Cameron Parry. He’s the founder and CEO of something called TallyMoney. It offers a regular bank account with a debit card, but keeps your bank balance in gold.
For now, the service is only offered in the UK. But consider the results. The price of a new iPhone has crashed 30% in two years for those keeping their savings with TallyMoney. And that’s for the newer model, too.
The point is, owning gold protected your purchasing power and then some. Whether you count the last 3000 years or two years, it has protected people from inflation.
But it’s not the only option out there to escape Australia’s cost of living crisis.
In fact, my friend Ryan Dinse reckons there’s an even better one.
Regards,
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Nick Hubble,
Editor, Strategic Intelligence Australia
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