Unfortunately, when savings are held in cash, they lose real return over time due to inflation. To effectively appraise an investment’s worth is to correlate it with an asset which can not be inflated, hence, gold. This is the manner in which investors can calculate in real terms how the investment is upholding.
All of the wealth we are amassing will one day be spent. Whoever spends it first (us or whomever we have left it to…hopefully, not the cat) will have as much as inflation dictates. A 15% gain in dollars is only 9% in real terms if USD inflation was 6% during that time frame. A money-market return of 1% is a losing investment if denominated in something inflating at 3%. This is the importance of adjusting for inflation so that you can see in real terms where your investments are in terms of profit.
Savings in gold from 1998 till 2010 would have produced a 332% gain with no purchasing power lost. After inflation and taxes, one could purchase 50% more in goods and services than in 1998. If the savings would have been in cash, it would have been a losing investment. I’ll even remind you that from 1998-2001 gold was in a state of oblivion and lost a third of its value in the fall of 2008. After all that, the profits of gold bullion savings are unsurpassable! Now, that’s a true safe-haven.
Using gold as a savings medium will obliterate the erosion in the dollar. If that isn’t convincing enough, read on. Since 2000 (when measured in both dollars and gold), the Dow Jones Industrial Average is up 4.7% in dollar terms, but dropped 82.5% when calculated in gold grams. If you had an investment of $10,000 on January 1, 2000, it would total just $10,740 today (apart from dividends), but, wait…this will make you sick, in gold it is valued at only $1,750! That is to say that investments made in the Dow Jones Industrial Agency Index have not only lost money in real terms, they are worth scrap when calculated in gold.
Following are other types of losses:
- When looked at the profit from stocks, here’s what we find. The S&P is behind 15.1% in dollars since 2000 and has lost a whopping 85.8% next to gold. If you are unfortunate enough to be the holder of an S&P index fund, you can be certain about two things: you have less dollars than what you started with (not including dividends) and have cascaded when correlated with gold.
- As for tech stocks, they show a monstrous backslide of 38% in dollars during the same time period, but cash entrusted in the sector has lost 89.7% when computed in gold grams.
- Hong Kong’s stock market, one of the leading exchanges in Asia, exhibits an accrual of 6% in dollars. Nevertheless, it surrendered 82.3% when appraised in gold.
- The primary stock market for UK companies is down 22.4% since 2000 when valued in dollars, but has slumped 87.1% in gold grams.
What is going on here? Apparently, measuring portfolios in dollars exaggerates performance in real terms. This isn’t to say that one shouldn’t invest in stocks. It means that one must:
- be aware of how results compare to gold or other real assets that one might buy with whatever currency one is dealing with
- regulate brokerage statements to allow for currency weakness
- not confide in stocks in general to outpace inflation
But, don’t think it is just investments that are deteriorating. Everything we use in our world is being depreciated, from what we eat to our modes of transportation and even our universities. We won’t see any profits if we don’t stop and think now about the long-term erosion of the dollar and how we can get past it.
Many experts have come to only one conclusion for combating the destruction of the dollar and that is by investing in gold. The dollars that are deposited and saved in a money-market account will progressively lose value every year. Actually, monies deposited into a simple savings account in 2000 have lost an inconceivable 25% of their purchasing power since then. On the other hand, if those savings were denominated in gold, the wealth would have not only been protected but increased. It is understood that this trend will carry on as well as pick up the pace. You best bet for your economic outlook is to cash in earnings every now and then and save them in precious metals. If, after reading this, you come to the right conclusion, you will not save the bulk of your savings in any currency because when compared to them, there is no shortcoming when saving in gold bullion!
