In mid-November last year we published a newsletter that was widely received and viewed hundreds of times. The title was "If you own gold and silver you're winning." Click here to read it. In today's newsletter I will expand on why you're winning if you have purchased physical precious metals.

When discussing money, there are three types, and historically the following order is the pattern in which currency cycles flow.

  • Commodity Money
  • Fiduciary Money
  • Fiat Money

A note about each:

Throughout all of history and even dating back two thousand years ago to Scriptural times, gold and silver have been used as money. Remember, Judas betrayed Jesus for thirty pieces of silver. These metals have intrinsic value, which means they withstand time. Other metals have purposes, such as steel for example, but steel rusts and corrodes if ignored. If gold or silver were dropped in the bottom of the ocean, and someone dove down to get it twenty years later, it would still be there. The image might fade, but the metal won't dissolve or lose value. While other metals have been and are currently used for currency, nothing has been as sought after as gold, and gold is rare. The latter is a contributor to its value.

Further, gold and silver are honest currency, because if I am paying you with gold or silver for a service or good, you know with complete certainty that you are getting something of value in return. Nothing gives gold and silver the authority of being worth something... Governments did not rule by edict that it was worthwhile.

Fiduciary money is what America began using when the Federal Reserve Act of 1913 was signed into law. A fiduciary is someone who takes prudent care of another person's money. When the federal government began printing money and assigning it value based on a commodity (gold and silver), the government was our fiduciary in this regard.

When President Richard Nixon took America off the "gold standard" we began having fiat money. Fiat is defined as "a formal authorization or proposition; a decree." And that's exactly what happened. Nixon decreed that American greenbacks had value by decree. The "Nixon Shock" as it was called was necessary primarily because of America's private national bank, the Federal Reserve. Currency manipulation does not work. After World War II, countries came together at the Bretton Woods conference to determine which country would have the world's reserve status. Meaning, which currency would all countries worldwide trade with. America was the obvious choice because we had 574 million ounces of gold at the end of World War II, but buy the time 1966 rolled around America only had $13.2 billion in gold reserves.

Tony's first home in Kannapolis, NC

Tony's first home in Kannapolis, NC

In 1977 when Tony was nineteen years old he purchased a 764 square foot house on Oklahoma Street in Kannapolis, NC, for $14,900. In 2014 the tax value of the same home was $68,040. If our current money had the same value the $14,900 would still buy the home. Of course the home would naturally appreciate some but the value has gone up 78.1% since 1977.Rarely would a home appreciate this radically based on its value alone. It's safe to say that the dollar losing value has significantly contributed to the higher price.

The dollar is corroding in value, and the creation of hundreds of trillions of dollars in the last decade along with the nearly doubling of America's debt in eight years is evidence that the dollar is in desperate trouble.

When presented with these facts, it's obvious to see the necessity for owning real hard money and why you are "winning." As the dollar continues to lose value, the money that you have exchanged for physical precious metals will become more valuable.

We do not recommend buying gold and silver for short-term trading; we recommend buying physical metals for long-term objectives. Paper gold and silver stocks have been sold hundreds of times for each ounce of metal, greatly reducing their value. Therefore, if you are buying precious metals at the current low prices you're really winning.