Today we see a growing number of people who are buying precious metals because they hear they need to. Jumping on the bandwagon seems to be a strategy that many follow whether they like it or not. Human nature almost dictates that as we see others doing something we get curious, curiosity grows interest in what is seen, and then interest spurns action. But is that a bad thing right now?
Looking at buying precious metals in the face of the new highs is difficult, especially when you look back to the 1990s when they were very inexpensive in comparison. But if you look at the fundamentals behind why the price has risen and why it might continue to rise, it does not seem as daunting.
The main reason the value of precious metals is up is that the currencies they are purchased in are down. I realize that I have said this numerous times before, but let me give you one example that puts it into perspective. In 1916 John D. Rockefeller was the richest man in America. At that time Rockefeller was capable of simply writing a check to pay off the entire national debt. Fast-forward to 2013, Bill Gates is now the bellwether of wealth that Rockefeller was then. If Gates liquidated his entire net worth it would merely pay interest on the nation's debt for two months. In fact the nation's 400 super rich only have a combined net worth of $1.7 trillion vs. our national debt of $16 trillion.
Two things come from what we just learned. First, taxing the rich is not going to solve our country's debt issues. In fact, even if the government were to confiscate the entire wealth of our super-rich we would still be over $14 trillion in debt. Second, the value of the dollar has been lowered by the fact that we have created so many of them. The value of what our dollar purchases will continue to diminish.
Many see that having an asset of lasting value is the only way to protect a future buying power. In the 1960s two silver dimes bought a gallon of gas. Today two silver dimes are worth over $4 and can still buy you a gallon of gas, but how many gallons do two regular dimes buy? Until our government undergoes lap-band surgery, its consumption of money will continue us towards doom.
Those who we have been seeing purchasing gold and silver are reading between the lines. If our government continues spending, there will be collapse of the dollar. As more people wake up to this fact we anticipate that the bandwagon will be growing. Jumping on is alright as long as you are not jumping on at the last stop, and from what is going on it looks like this wagon ride is going to be a long one.
Allen Rowe is the owner of Northern Nevada Coin in Carson City.
