Author Archives: USAGOLD
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Why the U.S. needs to encourage Americans to hold gold
We have always believed that citizen ownership of physical gold is in the national best interest, not just the best interest of its accumulators. In the event of a worldwide economic breakdown or a realignment of the global monetary system, it would be good for the country to have a storehouse of gold held by the populace. China encourages citizen gold ownership for precisely that reason.
“With a growing number of countries encouraging their central banks and citizens to acquire gold,” writes The Federalist‘s Sean Fieler, “it is increasingly reasonable to assume that gold will be part of the world’s monetary future, not just its past. The U.S. Treasury should embrace policies that will attract more of the world’s gold to America and better position our citizens and our nation for whatever the monetary future may hold.”
Gold in six easy lessons
1. Don’t buy it because you need to make money; buy it to protect the money you already have.
2. Don’t look at price as a barrier; look at it as an incentive.
3. Don’t buy the paper pretenders; buy the real thing in the form of coins and bullion.
4. Don’t fall prey to glitzy TV ads; do your due diligence instead.
5. Don’t allow naysayers to divert your interest; allow yourself the right to protect your interests as you see fit.
6. Don’t forget the golden rule: Those who own the gold make the rules!
‘Everyone knows they need a safe haven’
“Last March and April,” writes the Systemic Risk Council’s Paul Tucker in a piece published recently at Financial Times, “the fabric of our financial system was stretched almost beyond endurance. Only intervention from the north Atlantic central banks seems to have averted some kind of disaster triggered by markets grasping the pandemic was serious.” The most important lesson from that brush with disaster is that the financial authorities did not even bother to disclose to the public (and the investment community) just how dangerous the situation had become until months after the fact. It was labeled, you might recall, a “liquidity problem” that the Fed was addressing – no need to worry. Such circumstances argue strongly for having a hedge in place at all times just in case the wheels actually do come off.
MoneyWeek’s Merryn Somerset Webb posted a reminder of gold’s baseline portfolio role during times of market uncertainty in a separate Financial Times’ opinion piece in early January. “Think of the reasons to hold gold,” she wrote. “If inflation is coming (and it probably is) you want to hold a real asset that can hedge against it — one that can’t be inflated away by relentless money creation and currency debasement.…[E]veryone knows they need a safe haven, but everyone also knows the traditional ones (government bonds) no longer offer that safe haven. That turns us to gold, the one asset that has a 3,000-year record of protecting purchasing power. No wonder the gold price is up around 40 percent since 2018. I hold a lot of gold for all these reasons.”
Reliably serving physical gold and silver investors since 1973
Of 17th-century tulips, 21st-century stocks
and ageless gold
During the Dutch Tulipmania, the price of one special, rare type of tulip bulb called Semper Augustus sold for 1000 guilders in 1623, 1200 guilders in 1624, 2000 guilders in 1625, and 5500 guilders in 1637. Shortly thereafter, the bottom fell out of the market and prices plummeted to 1/200 of their peak price – a mere 27 guilders. In the artwork above an individual, portrayed in fool’s garment, is shown trading a hefty pouch of gold for a handful of tulip bulbs. It is no mystery who got the better part of that bargain. History teaches us that no era is immune to financial mania including our own. As a matter of fact, a good many believe that we are fully immersed in a stock market mania (wherein many include bitcoin) right now.
Since the earliest days of the USAGOLD website (the mid-1990s), we have enshrined a quote from Thomas Bailey Aldrich at our home page: “The possession of gold has ruined fewer men than the lack of it.” Aldrich’s axiom has held true down through the ages. It applied in ancient Greece and Rome, in 11th century China, in the time of the Medicis, the Dutch Tulipmania, the South Seas Bubble and French fiat money mania, during the long string of panics in the late nineteenth and early 20th centuries (Aldrich’s time), the spate of post World War I and II hyperinflations (Austria, Germany, Greece, Hungary, et al) and it still applies today.
When the USAGOLD website was established in 1997, there was no Google, no Facebook, no I-Tunes, no Amazon. Instead there was just a handful of scattered websites trying to figure what this new technology was all about and how it could be used to some advantage. We were among that group. Our idea of innovation in those early days was two spinning globes on either side of the USAGOLD logo. We marveled at it; considered it state of the art.
But being among the first on the internet to have spinning globes was not our only achievement. We were also among the first to sponsor a Daily Market Report (1996), a Discussion Group (1997), Live Prices and Charts (2007) and a Mobile Website (2011) – to mention just a few of our ground-breaking internet ventures. We await the next wave of innovation so that we can offer even more value to our regular visitors.
Through our 23-year presence on the world wide web, the philosophy underlying our website has always been a simple one – to act as a guiding light for our current and prospective clientele by providing a state of the art information portal coupled with a reliable and competitive brokerage service. We had and still have no aspirations beyond that, and that pinpoint focus has paid dividends beyond anything we would have imagined in 1996.
From a humble beginning, we have grown to almost 800,000 visitors per month currently and there have been times when that count has been significantly higher. USAGOLD today remains one of the most highly referenced and visited web portals in the gold business. We once had a client tell us of visiting the Gold Souk in Dubai and being surprised that so many merchant stalls had USAGOLD on their computer screens.
If you would like to gain a better understanding of what USAGOLD has to offer to you as a current or prospective client, the menu at the top of the page is a good place to start.
DISCOVER THE USAGOLD DIFFERENCE
ORDER DESK: 1-800-869-5115 email@example.com
How to hedge electronic circuitry run amok
With respect to the growing dominance of machines on Wall Street, I recall the old Star Trek episode that involves a visit to a planet where the inhabitants seem to be living in a state of perfect bliss. Captain Kirk knows that this cannot be right. There is no such thing as perfect happiness. As it turns out, the population is controlled not by a loathsome dictator who has drugged the population into compliance, but by a computer that has evolved sufficiently to somehow gain control of their minds. Something must be done, concludes Kirk, to break its hold. Spock comes up with the solution by instructing the computer “to resolve the value of pi” – an impossibility because its resolution, as we all remember from high school math class, is infinite. The computer spends all of its time and devotes all of its resources trying to achieve the impossible and the dictatorial hold it has on the population is released – a trick we might want to keep in mind for the day computers complete their mastery of Wall Street.
Similarly, Financial Times once told the story of the textbook, The Making of a Fly: The Genetics of Animal Design. It started out selling for $113 per copy at Amazon – that is, until the governing algorithm misfired between two third-party sellers. The price then skyrocketed to $23 million before someone took note and fixed the problem. We forget that computer software, and this applies to Wall Street’s trading apparatus as readily as it does the Amazon pricing platform, is only as reliable and intelligent as the code by which it is instructed to operate. The practical equivalent to Mr. Spock’s solution in the financial realm is to store sufficient capital in the form of gold and silver coins detached from electronic circuitry that might run amok.
Economic insecurity is becoming the new hallmark of old age
“In the United States,” writes Katherine S. Newman and Rebecca Hayes Jacobs for The Nation, “economic security in old age was seen, for a long time, as both a social issue and a national obligation. From the birth of Social Security to the end of the 20th century, the common assumption has been that we have a shared responsibility to secure a decent retirement for our citizens. Yet that notion is weakening rapidly. Instead, we have started to hear echoes of the mantra of self-reliance that characterized welfare ‘reform’ in the 1990s: You alone are in charge of your retirement; if you wind up in poverty in your old age, you have only your own inability to plan, save, and invest to blame.”
Chart courtesy of MacroTrends.net • • • Click to enlarge
Some compare today’s stock market psychology to the period just before 2008. Others compare it to the 1920s when everything was hunky-dory until suddenly it wasn’t – perhaps a more apt comparison. Too many are “all-in” with respect to stocks in their Individual Retirement Accounts hoping to accumulate as much capital as possible without regard to the potential downside. As the chart above amply illustrates, the stock market did not recover from the losses accumulated between 1929 and 1933 until the mid-1950s, almost 25-years later – a fragment of stock market history lost to time.
Some will rely on the fact that stocks recovered nicely once the Fed launched the 2009 bailout. We should keep in mind though that many prominent Wall Street analysts have warned that the Fed no longer has the firepower it did then. The financial markets and economy are much more vulnerable as a result – all of which brings us back to the notions of self-reliance and taking personal responsibility for our retirement plans. If you find yourself among the group that thinks hedging a stock market downturn to be in your best interest, we can help you effectively structure a gold and silver diversification as part of your retirement plan to hedge that possibility.
How to choose a gold firm
A quick guideline for beginning investors
It is surprising how many prospective investors simply dive into gold and silver investing without much in the way of a consumer inquiry. That lack of simple due diligence has ended up costing a good many investors thousands of dollars, and sometimes even hundreds of thousands before the damage is detected.
Here you will find some brief but useful guidelines to help
you choose the right gold and silver company.
Reliably serving physical gold and silver investors since 1973
Blinded by the Money Illusion
“Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.” – Janet Yellen, Former Federal Reserve chairwoman
With those words, Janet Yellen, now the Secretary of the Treasury and facing an even worse crisis than the one referenced above, put investors around the world on notice, though probably not in the way she intended. In the past, such smug assurances from public officials have been enough to send contrarian villagers heading for the safety of the nearby woods. The informed student of financial history knows that panics, manias, crashes, and collapses are as common to investment markets as hurricanes to Caribbean beaches. To think that suddenly we have banished their recurrence for ‘our lifetimes’ smacks of the kind of misguided hubris that contributed directly to the 2008 meltdown and subsequent untold financial hardship. Just about the time most everyone comes to the conclusion nothing could go wrong, everything goes wrong …… and in a hurry, as we have discovered over the course of the past year.
Only real intrinsic money survives the test of time
Here is a timeless observation from the now-deceased Richard Russell (Dow Theory Letter):
“Paper money is now being created wholesale throughout the world. Stated simply, all paper currency is now valued against each other. But more important, ultimately ALL paper is ultimately valued against the only true, intrinsic money – gold. In world history, no irredeemable paper currency has ever survived. Since all the world’s currency is now irredeemable (in gold), this means that in the end, the only form of money that will survive is real intrinsic money – gold. It’s not a question of whether gold will survive, it’s a question of when the world’s current paper money will deteriorate and finally die. I can tell you that irredeemable paper will not survive – but obviously I can’t tell you when it will die. The timing is the only uncertainty.”
The chart below from the World Gold Council speaks to Russell’s point. It shows the performance of various currencies – past and present – against gold over the long term. When the end comes, as the chart illustrates, it can come abruptly and without warning. For those who stick to the proposition that gold is not really an inflation hedge, or that it is not really a safe-haven against currency debasement, the chart offers instruction. For those who already own gold as a safe-haven, it provides justification. For those who do not own gold, it serves as an incentive. As the old saying goes: All is well until it isn’t.
Chart courtesy of the World Gold Council
We first introduced our readers to these nine lessons all the way back in 1999. They were passed along to us by the legendary commodity market analyst R.E. McMaster, formerly editor of The Reaper newsletter. The original source for the nine lessons was a highly regarded money manager who handled accounts for wealthy Greek and Mexican merchant families.
1. It is easier to make a fortune than keep it.
2. Intelligence is an inadequate substitute for wisdom. Wisdom fears, respects the unknown and fosters humility. Intelligence can lead to self-destructive arrogance and ultimate failure.
3. Risk must have premium, and we must understand it well.
4. There is no order. There is no formula. There is no equation that works all of the time. It works just long enough to fool just a few more of us just a little longer.
5. What we fail to remember is that a paper gain is just that. Paper. Worth nothing. Not until we say sell, and not until we get cash. Anything less is just that.
6. When the Bass Brothers in Texas write a check for real money, their money, to buy 25% of the Freeport McMoran Gold Series II, we take notice. When the Fidelity Magellan Fund buys a fifty-million in Dell computer, we yawn. So, should you. It is other people’s money.
7. Slick advertising budgets, powerful computers and few slabs of marble do not, by themselves, make a great financial institution.
8. Never invest in anything you do not feel comfortable with or understand well.
9. When a thousand people say a foolish thing, it is still a foolish thing.
Yap stone money inflation
Monetarily speaking, everything progressed smoothly on the island of Yap where large stones weighing hundreds of pounds were transported around to serve as money. That is until something unforeseen happened to the value of the money. For centuries, the stones served in exchange because there wasn’t much of this type of rock on Yap itself.
The depreciation of the stone money began when an enterprising Western businessman realized he could produce stone money cheaply and in copious quantities on a neighboring island and transport it to Yap, where it could be used to procure goods in demand elsewhere. In other words, this oceanic cousin of John Law printed Yap stone money to buy his wares at what might be called a “favorable” discount. By this process, the yap stone money was debased until it became worthless. Little did the citizens of Yap know that they were deprived of their wealth, and their money destroyed, by the process of monetary inflation.
Coins & bullion since 1973
Quality service and pricing since 1973
USAGOLD ranks among the most reputable gold companies in the United States. Founded in the 1970s and still family-owned, it is one of the oldest and most respected names in the gold industry. The firm’s unblemished, zero-complaints record and solid reviews with the Better Business Bureau testify to the exceptional customer service and professional excellence which sets it apart from the competition.
USAGOLD specializes in gold and silver coins and bullion delivered to our client’s safekeeping. For over 45 years, we have resolutely advocated owning precious metals for asset preservation purposes rather than speculation. Admittedly, this philosophy does not resonate with all prospective gold and silver owners, but if it does with you, we think you will find our firm a kindred spirit.
Two legendary central bankers embrace gold
In The End of Alchemy (2017), Mervyn King, the former governor of the Bank of England, writes of central banks’ frustration in dealing with the persistently stagnant global economy. “Central banks,” he says, “have thrown everything at their economies, and yet the results have been disappointing, Whatever can be said about the world recovery since the crisis, it has been neither strong, nor sustainable, nor balanced. . . [W]ithout reform of the financial system, another crisis is certain – sooner rather than later.”
“Our problem,” Alan Greenspan once said, “is not recession which is a short-term economic problem. I think you have a very profound long-term problem of economic growth at the time when the Western world, there is a very large migration from being a worker into being a recipient of social benefits as it is called. And this is legally mandated in all of our countries.” The western world, he concludes, is headed to “a state of disaster.”
It is interesting to note that both Greenspan and King, two of the most respected central bankers in modern times, have embraced gold since leaving their respective posts. The former Fed chairman has consistently suggested that gold is “a good place to put money these days given the policies of governments.”
The former governor of the Bank of England says that he is “very struck by the fact that over many, many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio…[W]hen unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold.”