I’m going to tell you a story that may seem far-fetched. At least, it did a few years ago. Maybe even a few months ago. Now though, with the pandemic and the protests and the economic strife, it may not sound so crazy after all.
Ultimately, it’s a story about you...or what can happen to you, given the emerging circumstances.
The setting of this story is sometime in the not-so-distant future in Your Town, USA. The bearish pundits, Fed critics, and the doomsday naysayers have finally gotten it right. They were playing the long game, and you knew that everything they had to say just made sense (despite their alarmist tone). America is undergoing a significant transfer in wealth. For many people, unfortunately, the wealth transfer isn’t a favorable one--as the signs were, from a mainstream perspective, unrecognizable.
What you see out in the streets might resemble something along the lines of the 1929 stock market crash (though you can only imagine, since, like most people, you weren’t there to witness it firsthand). In short, there’s panic in the streets, food lines, protests turning to riots, and an uptick in violent crime.
How did it come to this? Why did it happen? Regardless, you’re sitting at home feeling a sense of relief, and even perhaps a little vindication. Why the relief and vindication? People snickered, laughed, and rolled their eyes when you told them you were investing in precious metals to hedge economic and geopolitical uncertainty. Nobody is laughing now.
From time to time, you check the price of gold and silver. You notice the valuations getting higher. Today it’s only up 6%, but you know by the end of the day that will be 10% or 12% or maybe even, like one day last week, gold will have risen 22% with silver jumping up around 34%! The last time something like this happened was sometime in the late 70s.
Everything seems a bit unrealistic, almost surreal. Sort of like when COVID-19 hit in early 2020. Who would’ve thought that a pandemic would shut down most countries across the globe? But it happened. Now, the small investment you made in precious metals gave you something of a “golden ticket,” pardon the pun.
It all started when the central banks lost control of the second-level effects of their monetary actions. After years of currency manipulation, they overshot this time in a response to deflation, printed way too much money, and inflation started spiraling out of control. While government officials assured you there was nothing to worry about and TV economists on the nightly news said everything would be OK, you saw the truth. You thought to yourself, “this is bad and can only get worse.” So, you did what any investor with common sense would do: you allocated a portion of your wealth to gold and silver. Not soon afterward, the markets and the global economy began to crumble.
To your friends and colleagues, most of whom are probably mainstream investors; you look like a genius as your portfolio skyrocketed when everyone else’s plunged.
A quick tangential thought on this matter: in Ancient Greece (624 - 546 BC), Thales, one of the first philosophers, made a fortune by acquiring the first monopoly on olive oil at a time of severe shortage. I believe it was Aristotle who attributed Thales’ success to his supreme knowledge of astronomy, being able to read the stars to divine the fundamental conditions of the olive crop. In short, Thales was (read; “appeared as”) a “genius. Likely, Thales wasn’t a genius, in that way, at least. He just saw an opportunity: olive oil presses were cheap to rent! And the potential monetary loss of buying presses was insignificant compared to the positive monetary gain should there be a good harvest. Well, there was a good harvest, and Thales temporarily owned all of the presses. It was a simple reward-to-risk calculation that made him his fortune.
Well, you did the same thing. You saw an opportunity, and you figured the risk was much smaller than the potential return. As a result, you went from hardworking but relatively comfortable to incredibly wealthy in just a matter of days. But while this new reality is a boon to you and your family, it’s not without issues.
The violence and unrest are real. The riots, the gas lines, and National Guard presence is the stuff of serious concern. The fact that people are fighting against a system where $100 won’t fill up your tank or get you a meal at a fast-food restaurant is just insane. It’s all you see on the news. People are trying to survive as the only currency they hold; the US dollar is virtually worthless.
If people find out that you hold gold and silver, you’re a potential target. You’re worried about the metals you’re storing safely at home. You also wish you had less of it in a bank safety deposit box because the banks are under siege. You saw on the news last night that a gold and silver shop got looted, and you worry about the time you told your friends and family about your investment--what if that information gets to the wrong person?
Most everyone you know is now calling you, asking what they should do, where they can get gold from, or how much they should pay for silver. Cash is losing value by the minute, and everyone is scrambling to spend it on something tangible. Now they want to trade in their paper money for sound money. But it’s too late.
Despite all the turmoil and unrest, you feel a sense of calm and relief. You have gold. You have silver. You bought when the signs said, “buy” and now you are among the wealthy elite overnight.
You sit at your desk, realizing that your paycheck is worth pennies, proverbially speaking, so why are you still here? All your wealth is now in your holdings. Anything you want to invest in now is incredibly cheap. Maybe you’ll use some gold to buy another home away from the chaos, or trade-in some silver to stock up on supplies. The more expensive these items become, in dollar terms, the cheaper they get for you in terms of gold and silver.
As you walk around at home, preparing to face whatever the future holds after this massive wealth transfer, you come to grips with your new reality: you have plenty of options, as you are now among the wealthy elite.