The Monster in “de-basement”

The Killer in De-basement

De-basement is not just the place where Americans store their junk. It’s also silent robbery, a killer of your wealth, and usually sanctioned by your government.

Starting from the day before the pyramids were built (commonly known as Keith Richard’s birthday) around 10 000 BC, gold and silver have been used by humankind as money.

Yes, the Chinese created paper money WAY before it was used in Europe (and the Chinese also led the world in hyperinflation, when the rulers of the Song Dynasty printed too much paper in the 1100’s and collapsed the economy).

Despite occasional paper, fiat or full economic crashes throughout history (more frequently than every century), gold and silver have ruled supreme for millennia. Back when the USA was on the Gold Standard (and the British used silver, hence “pounds sterling”), the economy was stable, predictable and functional.

Paper money could be redeemed for its equivalent value in precious metals without question at any time. As some may be aware, the USA moved from a full gold standard to a partial gold standard after World War Two, and then abandoned the gold-backing altogether in 1971.

Since then, the paper dollar has increased in volume and decreased in value. When someone takes pure precious metal and adds some junk filler, it is called debasement, literally a lowering of the actual value, even though the face value may increase. You feel like you are holding a fortune if you are given a $100 bill, until you try to redeem it for the “eternal money” of precious metal.

One US$100 note would now get you around TWO GRAMS of gold. Back in the Great Depression of 1933, $100 would have gained you around 100 grams of gold. After WW1, in 1919, you could have held 150 grams of gold for the same $100.

As paper money has been debased slowly over time, most people do not notice. It’s a robbery by stealth.

Prior to 1964, the USA minted coins which were solid silver. Was it the silver price rising, or the devaluing of the dollar which made the government start debasing the coins? There is the same amount of silver on planet earth which existed 10 000 years ago, but the amount of paper money just increases exponentially.

In 1965, the USA coins were 90% silver, and went down over time to 40% and then 0% by 1971. A 1964 USA Kennedy silver half dollar (face value $0.50) can easily sell for US$12 or more now, due to its silver content. In Australia, a 1966 silver 50-cent coin (face value $AU0.50) can sell for $AU15 or more, due again to its silver content.

Be warned that if you take the coins to the local bank, they are obliged to only give you the face value (the government agreed value), not the value of the underlying asset. How many people have made the mistake of emptying grandpa’s old piggy bank and being given a tiny fraction of the coin’s actual intrinsic price? Note that it is against the (government) law to melt down your old coins into precious metal, however, it is definitely legal to sell them to collectors, buy them from reputable sources or trade them for goods and services.

As many governments around the world initiate “cash bans” where it is illegal for citizens to hold more than $5000 or $10 000 in ‘cash’, consider that you may be able to legally hold coins of say, 10 000 silver half dollars (face value $5000, but tradeable value of over $150 000.

This could be a useful idea for someone who knows that bank interest rates are barely keeping up with government inflation (another “robbery by stealth”), or anyone who has been watching government bonds in many nations hitting negative rates of return. (It’s true, buy a government bond in many countries for $100 000 and in ten years you will have around $90 000. If hyperinflation kicks in, you’ll need that $90k to buy a loaf of bread in 2030. Not kidding: refer to 1920’s Germany, 2008 Zimbabwe, Venezuela, Argentina and more).

The rules of the investment and wealth game have changed. It’s time to change the way you play. Watch out for the killer in de-basement, and do your own research (DYOR) into scarce commodities such as precious metals and (some, not all) cryptocurrencies. #gold #silver #copper #bitcoin #bostoncoin