Let’s begin with a philosophical question: What is wealth?
Most would say “money.” Some would say “stocks,” “bonds,” or any other type of financial asset.
However, none of these are true wealth. They are claims on wealth that are valid as long as everyone agrees on it. In contrast to real estate, commodities, food, or clothes, which are tangible property, most financial assets have no inherent value.
In fact, stocks, bonds, and paper money are simply agreements—the same way a fiat currency is just paper or numbers on a screen that represent your part in a fiat system that is ruled by central banks. Worse, central banks use this money created out of thin air to manipulate and inflate asset prices.
Any serious systemic crisis can render these fiat agreements worthless, which means all paper assets are at risk.
For real-world examples, look no further than the hyperinflation periods in 1920s Germany, Yugoslavia in the early 1990s, or Zimbabwe in the 2000s where the country’s currency became worthless over time.
The most recent example of a hyperinflation nightmare is Venezuela. As you can see in the chart below, in 2017, the inflation rate in this country soared past 4,000%... crippling the nation and wiping out savings along the way.
Despite historical examples, it may still seem unrealistic that this could happen in the US or any developed country. That’s because people have a hard time grasping things they haven’t experienced themselves.
But think about it—before the 1920s, how many Germans thought the exchange rate of their currency to the US dollar would one day be 4.2 trillion to 1?
In fact, many economists draw parallels between Germany being burdened with $23 billion in reparations after WWI and the US today sitting on an ever-growing pile of debt.
But you don’t need hyperinflation to see your fiat currency dwindle over time. The chart below shows the US dollar’s loss of purchasing power since the Fed’s inception in 1913.
To put this in perspective, take a look at what you could have bought with $1 throughout the 20th century.
One dollar bought:
A pair of leather shoes in 1910
16 cans of Campbell’s soup in 1934
20 bottles of Coca Cola in 1940
Two movie tickets in 1960
A bottle of Heinz Ketchup in 1980
A gallon of milk in 1990
Compare that with what you can buy today with a single dollar bill. A song on iTunes? A McDonald’s cheeseburger?
True wealth, on the other hand, is things that have inherent value.
The value of tangible assets like gold and silver is not based on contractual claims and can’t be destroyed by the fiat system. They can’t be printed. They can’t be devalued and easily manipulated, either.
Many assets fall under this category, including commodities, but most of them are impractical to hold from an investor’s perspective. Oil, artwork, or farmland can’t be efficiently used as a store of value and means of exchange.
However, there’s one asset class that checks all the marks in this regard: physical precious metals.
(Side note: any exposure to precious metals through ETFs falls into the category of financial assets whose value is based on contractual claims.)
Physical precious metals are the only asset that is well recognized and is not someone else’s liability. Unlike paper assets and currencies, metals like gold can’t default on their value.
When you own gold or silver, you don’t depend on another party—whether it’s a private company or a government—to make good on its end of the deal.
There’s no other asset class that can preserve wealth like precious metals, especially gold.
Civilizations around the world have valued it since the dawn of humanity. It has passed the test of time and served as a store of wealth through millennia.
Let’s look back in time to put this in perspective.
In 1978, gold traded around $193/oz, and it took around 290 ounces of gold to buy the median-priced new home in the US.
In 2018, gold was trading in the $1,300-$1,400 range, and it took around 240 ounces of gold to buy the median-priced new home in the US.
In this case, not only has gold preserved wealth, it has also grown it.
Gold is also a good long-term investment. Since the end of the gold standard, gold has been in a big uptrend. Here’s the gold price since the founding of America.
Not only that, gold is not correlated to the stock market.
Even better, gold’s correlation to equities decreases further during recessions (see the chart below), which makes it the perfect crisis insurance for bubbly equity markets.
Clearly, there’s no better asset than physical precious metals to protect and grow your wealth.
Now, if precious metals are so amazing, why don’t all investors hold them?
Apart from political reasons, owning physical gold was a real hassle not so long ago.
First, you had to find a place to safely store it. Home storage is inconvenient and dangerous; safe deposit boxes can be confiscated by the government in a financial crisis. Other options are either forbiddingly expensive or not available to the average investor.
Also, if you take possession of physical precious metals, they become less liquid. When you want to sell them back, the metal has to be re-assayed, which limits your selling options and adds time delays.
All of this made trading physical precious metals costly and time consuming.
But not anymore...
The Hard Assets Alliance was founded with a mission to provide a hassle-free and cost-efficient solution for private investors to invest in physical precious metals.
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