Purchasing Power
Arguably the biggest casualty of the Vietnam War was on August 15th, 1971 when Nixon ended the direct convertibility of the dollar to gold. Since the United States abandoned the Gold Standard in 1971, the United States Dollar has lost 98% of its purchasing power. So after 55 years, for every dollar indexed to 1971, the American citizen is left with 2 cents. Hopefully, the United States never removes the penny from circulation...what would be the purchasing power of the dollar then?
Here at Invest Like A Farmer we have long been champions of owning gold, indeed we were among the first to suggest investors consider buying their own gold mines (in the form of gold mining claims.) Why is that? Investing ultimately boils down to cash flow. Cash flow implicitly implies a certain standard of living or purchasing power. Purchasing power over time is paramount, and gold is one of the best stores of wealth (toil) of any asset class. You do not want to have to earn your money twice!
Alan Greenspan once quipped that: "I can guarantee the amount of future Social Security benefits and for how long, but not their purchasing power." That is a very salient comment. At some point, cash flow needs to be tethered to reality, and that reality is purchasing power. Gold is elemental in its ability to store value.
For many Americans outside of the Baby Boomer generation the American Dream remains elusive, if not completely out of reach. It is out of reach because assets of high quality (read real estate) are in high demand with frequent hoarding by both generational wealth and corporation now. The world is awash in cheap goods and services labeled as "free" which collectively siphon off trillions of zinc pennies at a time.
Assets of true value are almost unobtainable for younger generations because: 1) there is an artificial shortage of housing (lack of supply for several reasons), 2) there has been virtually zero real wage growth in 50 years, 3) there has been an utter collapse in the purchasing power of the USD.
Since time immemorial governments have debased currency in the attempt to spend more than the currency can afford; some of the earliest known tricks were to make coins of lower grade gold or silver, make coins smaller, cut edges off, change from gold and silver to silver and copper, change from metals to paper that was redeemable for gold or silver, paper that was redeemable for nothing, and most recently electronic money which can have an infinite supply.
Much of the reason why America grew so quickly was an abundance of land and the California Gold Rush of 1849. The Gold Rush triggered one of the greatest migrations in human history. That also added in today's dollars TRILLIONS in "God's money" aka gold to the financial system. Gold is so powerful FDR actually criminalized the ownership of gold in 1933 via Executive Order 6102!
There has rarely been a better time to purchase or stake a gold mining claim in the United States. With gold trading at $5,000 oz-t. mineral rights on these claims can be worth millions of dollars in gold. Of course one must have sufficient knowledge, capital, and the willingness to work; but the average high school student properly trained, duly equipped and unleashed in gold country stands to make more in a week than an entire summer flipping burgers or mowing lawns.
As the Age of AI dawns upon us, many layers of work will disappear. Vast segments of labor will no longer exist. Promises of utopian society have begun to emerge with Universal Basic Income solving humanity's woes. The reality, however, almost always reverts to basic human nature of self-preservation and survival. Our bet at ILAF is that gold will have a central role in that future of protecting purchasing power.
