Why Invest in Physical Gold today
Well known in the form of jewelry, one would almost forget that gold has always played a very important role in our monetary system. Gold has circulated as a currency in many countries and has contributed to the prosperity of many civilizations. As I will explain, gold, although it is no longer officially at the center of the monetary system, continues to play an important role, especially at the level of central banks. As an individual, we can also invest in gold and we will see why and how gold serves as wealth protection and anti-crisis insurance in a diversified portfolio.
Since August 17, 1971 and the announcement of the end of the Bretton Woods Agreements (1946-1971) by US President Richard Nixon, the Dollar, the international reserve currency, is no longer convertible into gold. And since Switzerland stopped hedging the Swiss Franc in 1992, no currency in circulation is backed by gold. The end of the gold standard opened the door to deregulation of the financial sector and the arrival in the 1980s and 1990s of new financial instruments, “derivatives”. “Financial weapons of mass destruction” as the famous investor Warren Buffet calls them, referring to the systemic risk they represent. In 2008, when the bubble in the US mortgage lending (subprime) sector exploded, the amount of stakes in the derivatives market threatened collapse of the entire global banking system.
You know the rest, to save the system, the central banks created money (printing press) in very very large quantities to bail out the banks, 4.5 trillion USD (4.5 trillion dollars) just by the United States Federal Reserve between 2008 and 2014. But that only temporarily pushed back the problem, and especially worsened it. For the simple reason that we do not solve a debt problem with more and more debt … Today the size of the derivatives market is estimated at 1.5 quadrillion, double what it was in 2008! A real time bomb. When it explodes we will face an even more serious crisis than the previous one. At that point we could see the end of the financial and monetary system as we know it.
“Give me the power to create money and I don’t care who makes the laws!” Mayer Amshel Rothschild.
History Has a Message for Us!
By analyzing the different paper currencies that have existed in the past, it is interesting to note that none of these currencies (not convertible into tangible assets) have survived, regardless of the country. In the end, it was always gold that won (the average lifespan of paper money is 27 years). The Euro was created in 1999, 17 years ago …
As the following chart shows, no reserve currency has retained its status forever, and it will be no different for the US Dollar.