Precious Metals Protect Against Inflation and Currency Debasement

Monetary expansion of currency—a fancy way of saying “printing money”—is a source of inflation. In order to understand this, you need to know the difference between two terms: commodity money, which is money created from or backed by a commodity (often a precious metal such as gold and silver), and fiat money, which is a currency, usually paper money, authorized by a government but not based on or converted into gold or silver. The only way paper currency enjoys legitimacy is by mandate of the government. In addition, paper currency has no value of its own: without this government mandate, it is just paper. Commodity money cannot be printed or inflated, whereas fiat money can—and when it is printed, the value of the fiat money is being reduced as more paper money is chasing after the same amount of goods.

Because our monetary system doesn’t require our paper currency to be tied to a store of value like gold or silver, our government can decide how much money it creates. In other words, our government and the Federal Reserve can manipulate the money supply and create as much money as they want.

The result is deficit spending and a loss in the purchasing power of the dollar (inflation), which has led to a debasement of your money—effectively, your wealth has been transferred to the government. The ability of the government to inflate and increase the amount of currency is the overall biggest obstacle to your financial security, and it’s basically inflation-based wealth confiscation.

Alan Greenspan, Federal Reserve chair during the early 2000s, described our monetary wealth confiscation this way:

“Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

In the chart below, you can see the alarming drop in the dollar’s value over the past century. You feel it when you go to the supermarket, when you pay for your children’s higher education, and when you consider your next vacation: your dollars are worth less and less every year.

Unlike the US dollar, precious metals cannot be debased by mass printing. Bank of America recently wrote in a recommendation to acquire gold: “The Fed cannot print gold.”

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