Gold and Silver – History always repeat itself (Part 3)
19/06/2016 at 7:41 pm #458
Of late, I was totally enthralled by the story of Gold and Silver dated back not just hundreds but thousands years back. This was also narrated in Part 2 of my gold and silver series. While I did my homework and owned this alternative investment since sometime back, it was not until recently that I have never dig so deep into unravelling its past.
“The farther back you can look, the farther forward you are likely to see.” – Winston Churchill
So I began to read lots of articles and watched many videos relating to the precious metals. And mind you, when I am engrossed into something I love or believe in, I will always pour my heart and soul into it, and often even in my dream! Just like before this, I was very into Mixed Martial Arts and devoted so much of my free time researching on it. I reckon MMA is going to overtook boxing in popularity going into the future.
Back to precious metals, I came across this guy by the name of Mike Maloney who founded and own GoldSilver.com. There are many valuable videos from Mr. Maloney that are free and in my opinion of great educational importance drilling out facts, without any boastful slogans! After benefiting from all his free videos on youtube, I decided on a win-win strategy. This is to reward Mr. Maloney and at the same time further enriched myself by buying one of his best-selling books “Guide to Investing in Gold and Silver.”
In this article, I will like to reproduce one interesting pattern that Mr. Maloney pointed out in relation to our world monetary system and the precious metals. Excerpts from the book as follows:
The 7 Stages
1) A sovereign state starts out with good money (i.e. money that is gold or silver, or backed fully by gold and silver)
2) As it develops economically and socially, it begins to take on more and more economic burdens, adding layer upon layer of public works and social programs.
3) As its economic affluence grows so does its political influence and it increases expenditures to fund a massive military.
4) Eventually it puts its military to use and expenditures explode.
5) To fund the war, the costliest of mankind’s endeavours, it steels the wealth of its people by replacing their money with currency that can be created in unlimited quantities. It does this either at the outbreak of the war (as in the case of WW1), during the war or wars (as in the cases of Athens ad Rome) or as a perceived solution to the economic ravages of previous wars (as in the case of John Law’s France).
6) Finally, the wealth transfer cause by expansion of currency supply is felt by the population as severe consumer price inflation, triggering the loss of faith in the currency.
7) An en masse movement out of the currency into precious metals and other tangible assets take place, the currency collapse and massive wealth is transferred to those who had enough foresight to accumulate gold and silver early on.
1) Good money
2) Over spend
3) Growing political influence to fund military
4) Military explodes
5) War funded by currency expansion
6) Loss of currency confidence
During hyperinflation, gold and silver will always emerge as winner as from the history of mankind.
Do you agree with this pattern?
I shall reserve my thoughts for now.
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