“Paper money is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted.” —Thomas Jefferson
If I told you that the American Dollar isn’t money, would you believe me?
Well, I am sorry to break it to you… but it isn’t.
Even looking back to the United States Constitution, it declares that the “states shall have no money, except for gold and silver.”
So what gives?!
What is the American Dollar? What changed? How does this affect your financial future?
All great questions, but this is going to take a good bit of explaining.
Lucky for you, I am very passionate about this topic. So let’s get into it!
What is Money?
The way that most of us think of money is the exchanges we use it for.
I give you five-dollars, and you give me a hamburger.
But money has a bit more to it than that.
Besides being a unit of exchange, money also needs to store value over time.
Looking at how the prices of goods have risen over the past 50 years, it is hard to say that the American Dollar has kept its value.
Just think back to how that same five dollar hamburger used to cost fifty cents back in the day.
Because of this, the American Dollar is currency, not money.
It represents the economic system we all buy into, but it does not have a stable value.
That is why gold and silver are true universal money.
Gold and silver hold their value, you can exchange them for other goods, it is divisible, and it is fungible (one ounce of gold is equivalent to every other ounce of gold).
They both have been recognized as money for over 5000 years, and only recently have we turned away from them as the primary form of purchasing power.
I could get into more of the implications of this, but suffice to say gold and silver have a tangible value that you can use anywhere in the world. The dollars’ value, on the other hand, is made up and can change drastically over time.
If you want to know even more about the history of gold and money, check out the video series, The Hidden Secrets of Money by Mike Maloney. This provides a lot more in-depth information on how gold and silver work as money and how this affects the economy as a whole.
Gold and silver are money. Dollars are not.
What Changed?
For its first 200 years, the United States followed the Gold Standard. This meant that all dollars were backed by gold.
So, the twenty-dollar bill in your pocket was worth the value of one ounce of gold.
The dollar bill was more of a claim check. You could go to the government, and exchange your twenty dollars for the value in gold.
The dollar bill wasn’t the money, the gold was.
For those 200 years, there was no inflation. Money’s value stayed the same.
Then in the 30s, citizens were no longer legally allowed to own gold. People still did, but much of the gold went to the government to hold so they could try and correct the economy in response to the great depression.
But in the 1970s, we got away from the gold standard. Our currency became fiat. The money was no longer backed by gold or a tangible asset.
The value of the currency becomes implied. It is no longer intrinsic.
Put another way, the dollars in your pocket are really only worth the paper they are printed on…
Coming away from the gold standard, inflation came and dollars became worth less and less.
To put that in perspective, in the last 50-100 years the dollar has lost 95% of its value.
And it gets even worse.
Because the dollar is no longer backed by anything, the government is now able to endlessly print money. We have seen this with the recent stimulus spending in response to the Covid-19 pandemic.
However, printing money comes with the risk of inflation. In extreme cases, it could lead to inflation like what happened in 1920s Germany or Zimbabwe in 2008.
I am not saying something as bad as that will happen to the U.S. because our currency is fiat.
But I am saying that you should be aware that inflation is part of the course of a fiat currency, and you should do whatever you need to protect your money.
The best bet… gold and silver.
Your Financial Future
Gold and silver are great ways to hold onto your wealth. They hold onto their value better than anything else.
A friend of mine gave me a great example to prove this point.
Look at a nice men’s suit throughout history.
100 years ago, the value of a tailored suit was one gold coin. And now, converting dollars to gold, a similar suite still costs that same amount of gold.
Even though the dollar value is higher, the actual gold value stayed the same.
Gold retains its value, and because of this, it is a great asset to have to keep your wealth.
It is a stored value.
But I do have to admit there is a catch.
Many people think of gold and silver as an investment to gain dollars. You buy gold, and then sell it for more dollars later on. But that is kind of the backwards way of looking at it.
As the suite example just showed, you aren’t gaining any value or purchasing power when trading in the gold for dollars. You are only getting more paper.
This protects your wealth, but it does not grow it.
So… how do you gain wealth in a world that only uses dollars and other fiat currency?
And how do you protect your money as more and more money is printed, and more inflation is on the horizon?
Gold and silver are amazing ways to hold onto your wealth. Its intrinsic value stays the same, and you can keep your value over time.
But if you are wanting to grow your wealth during times of inflation, multi-family real estate investing is the place to be.
Multi-family real estate is a very stable asset class. Year-to-year, rents have been shown to rise with inflation. Because of this, the investment is basically an inflation hedge.
And you can even gain wealth through these kinds of deals as the value rises over time.
Whenever it is times of inflation, I put my money in gold and silver, and multi-family real estate.
Luckily, I know a few things about that too.
Check out our special report about investing. It compares the stock market to real estate, and it also includes how the pandemic affects your investment future.
If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.
