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How Americans Sold Their Wealth to Buy Debt

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At the peak of gold’s price in 2011, Americans came out in droves to sell their gold jewelry. The sad thing about this is that gold, regardless of whatever form it took, was essentially their most valuable financial asset. They cashed in “sound money” and for what? The sad answer is all too obvious: Americans sold their wealth to get into more debt.

The impulse to buy now and pay later might make sense if what you are buying might have an even greater pay-off in the future. That’s called an investment. But it is unwise to go into debt to buy goods and services that you might have been able to do without. By the way, did you know that in the first quarter of 2017, a large majority of America spent most of its money buying recreational vehicles!? But more importantly, it’s a virtual financial death sentence to be in perpetual debt beyond your means to repay.

And this, sadly, is the current story of American consumption.

According to an article published by Zerohedge, 45% of Americans spend half of their monthly income paying down their debt--and this does NOT include mortgages! With a median personal income of a little over $30,000, and an average debt of over $37,000, there’s little wonder why most Americans have very little money saved.

In fact, 50% of all baby boomers have absolutely no savings or funds set aside for retirement!

This is the case now as it was then, in 2011, when Americans practically “pawned” their gold--i.e. their “real money”--to dig themselves deeper into virtual impoverishment. As harsh as it may sound, the fact remains that if you owe more than you have, and if what you owe will not produce “wealth,” then you are virtually impoverished.

While America was going through its gold-selling frenzy, China and India had the opposite idea: they held onto their gold. Based on U.S. Gold Scrap Supply levels in 2011, scrap supply increased to record levels--around 160 metric tons. In case you didn’t know, gold scrap is essentially recycled gold jewelry.

Here’s a comparison of what took place in 2011:

  • Americans sold gold jewelry (for conversion into scrap) at 266% over jewelry demand.
  • Chinese sold their gold jewelry at 26% over jewelry demand.
  • Indians sold their gold jewelry at only 9% over jewelry demand.

The bottom line is that the majority of Chinese and Indian citizens were acquiring and holding onto gold jewelry while Americans went on a selling spree!

We Americans are in very serious trouble if we continue our current spending and consumption habits. Furthermore, we will remain in trouble unless we recognize the true “value” of gold beyond its dollar price.

Gold cannot be created out of nothing. It cannot be artificially inflated. It is rare. Its value is stable. And it should not be thought of as anything other than what it is: sound money and real wealth.

Gold’s value will withstand a collapsing US Dollar. Gold will withstand a collapse in the stock, bond, and housing markets.

Ultimately, Gold is what will keep you standing amidst a crashing economy.

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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