What Happens When You Try To Explain To People Why They Should Invest In Gold & Silver
Well, I have to start this story off by first saying that I am a common-sense person, and am optimistic. You could say I am a glass-half-full sort of person. I am most certainly not prone to doomsday thinking etc. The reason I have to clarify this is because when I talk about why I am investing heavily in gold & silver it tends to sound and come off as doomsday or catastrophic in nature.
I tend not to talk to people about my investments, especially those that have none or very little financial knowledge. I find it does not go well, I do not know if it is because when you start to talk about investing and finances people start to realize all that they do not know and are embarrassed. also, people by nature tend to try and put people down whom they perceive as smarter, more put together or successful. So if I talk about my investing successes they rarely are happy for me or will try and find a way to dismiss it or cheapen it, by saying things such as “it is just luck” “you are taking risks” “it is just gambling”. So I tend to keep my finances to myself, except for those people who I like and respect and care about. Those people I want to help and if they ask I will usually gladly offer my help or opinion.
Well, the other day a couple of coworkers inquired about my investments and stocks. I told them that I sold the majority of my stocks and invested heavily in gold & silver. Well, this got their attention and they both said “gold!” they were curious as to why I was in gold, so I told them very simply I was in precious metals because it is the only true money! Well, that did nothing but confuse them, so then I began to explain what fiat currency is and why it has little true value and will go to zero eventually as all fiat currency has in history. They did not understand this so the conversation went into the rabbit hole of fiat currency and central banks manipulating the financial system. I then explained that because of central banks around the world manipulating everything and increasing the debt by unprecedented amounts that the financial system as we know it is at risk of collapsing.
That is when I received the look, you know the look someone gives you when they think what you are saying is crazy, but they do not want to say it to you. Well, I got that look and some! Now because the people I was talking to are people I respect and care about I decided to continue and try and explain to them in the hope they would take something away from the conversation that would help them and their family.
I kept it simple and provided the following reasons why I felt like the current financial system is in danger.
In the last financial correction in 2007-2008 central banks jumped in and prevented the normal financial corrections to take place. poorly and highly indebted businesses were bailed out and prevented from failing. this prevents the natural financial corrections to take place. normally business failures weed out the poorly run businesses and allow the well-run companies to snatch up the failed companies skilled workers and assets for cheap. it also allows the debt to be wiped out. this was not allowed to occur, so no debt was wiped out, instead, it was increased and those same poorly run companies are still poorly run and their debt load have increased. So the bubble has just gotten bigger!
Printing of huge amounts of fiat currency
Since the last financial crisis in 2007-2008 governments around the world have printed huge amounts of money. I explained you cannot just print money out of thin air without consequences. I explained how faith will be lost and the value of the currency will eventually drop. I explained Gold again is the only true money and it will hold its value when fiat currencies start to fail.
Low or negative interest rates
Historically near the end of an economic recovery interest rates rise as the economy recovers and strengthens. I said rates are currently very low, especially when we are at the end of a 10-year recovery or expansion. I explained that if a recession or downturn was to hit tomorrow central banks and governments would have fewer tools to try and fix it. normally it takes approximately a drop of 4% in interest rates to get an economy out of a normal recession. The majority of economies are below 2% currently and some are in negative. I then blew their minds by explaining that most countries would go into negative interest rates. I said you will soon have to pay the bank to hold your money.
Inverted Yield Curves
I lost them big time when I tried to explain inverted yield curves, They did not even know what a bond was. I just kept this one simple and said that over 35 countries currently have inverted yield curves and this historically has signalled a coming recession.
I told them that I cannot predict the future, but there are risks or cracks developing and to ignore them would be unwise. Do these risks mean that the financial system will fall, no! but all put together they present some large hurdles that have to be overcome in order for the financial system as we know it to continue. I said in this kind of environment gold and silver historically do well. It is a simple risk vs reward. Right now stocks and risk assets have a larger downside or risk profile compared to their potential upside, Whereas gold and silver are the opposite, their upside is much larger than their risk or downside.
What would happen if the Financial System Crashes?
My friends then asked me what I think will happen in worst-case scenario and so I began to tell them I think people will eventually lose faith in the government, fiat currencies and there will be a run on the banks, where everyone is trying to get their money out of the banks at the same time. I explained when this happens the government will step in and people will not be able to get their money. my one friend said, “they cannot do that, it is illegal!” I explained no it is not, and it happened in Greece after the financial crisis of 2008, the amount people could withdraw was limited to a small amount each day. I explained that most if not all banks do not have enough liquid assets to cover a run on the banks, and the banks and governments would have to step in or the banks would be bankrupt and go out of business and then no one gets anything. They then asked, “what about the amount that is insured by the government?” I asked them how can the government who is already indebted with huge amounts of debt cover an entire country trying to withdraw all their money at once? I said they can’t and if they did, it would just mean they have to print more money out of thin air, which would just add to the problem and weaken the faith in the fiat currency. I explained restrictions would be put on withdrawals and perhaps a bail-in would happen and banks would issue worthless shares in the bank instead of money. I asked my friends how much food can you buy with a share of a bank that is insolvent, and the answer is NONE!
By this point in the conversation, I can see that they are beginning to think I am over the top and nutty. I understand why someone would think this, especially if you have no financial knowledge and have never heard of these topics, or let alone thought about them. Also, who wants to think of such a negative event unfolding, especially if you have no knowledge on how to deal with it, and you know if it happens you are in trouble. Add in the fact that I am not a scholar when it comes to finances, I understand these things well but do not do the topics justice when I am trying to explain them, especially to someone with no financial knowledge.
Because I could see that I was losing them, I concluded by saying that change is coming that is for sure. What form or how large in scale that change is the real question that no one can answer.
How Do I Buy Gold?
At the end of the conversation, they asked “how do you even buy gold? I wouldn’t even know how to go about it” I explained there are numerous ways depending on how you want to hold it. one asked if she could just call her financial advisor, I explained unless he or she could make money off it in a commission, they would probably discourage it. I encouraged her to ask her advisor nonetheless.
I explained to them that I use GoldMoney and it is very easy to buy and sell precious metals. I explained to them that I have my gold stored in non-bank vaults around the world. they asked why I have my metal in vaults around the world and I explained it is to hedge against gold confiscation as the United States did back in the thirties. They are both not very technologically savvy so using GoldMoney did not seem to interest them. I encouraged them to look them up online as they are the company I use and trust.
This is not financial advice and all financial investments carry risks. Investors should seek financial advice from professionals before making any investment. I wrote this article myself and it expresses my opinions.