The Three Ways of Wealth
This article was submitted by Matt Malleo, Managing Director at SchiffGold. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
In his book Crash Course: The Unsustainable Future of Our Economy, Energy & Environment, author Chris Martenson describes the three types of wealth. Following is a brief breakdown of those three wealth categories and in which types you should focus your investment strategy. (For further reading on this topic, I suggest Crash Course and Second Chance by Robert Kiyosaki. Both books were referenced in the following article.)
The three types of Wealth are: primary, secondary and tertiary.
PRIMARY WEALTH
Primary wealth is direct ownership of physical resources. Some examples would include owning physical gold/silver, farmland or diamonds. Primary Wealth is simply wealth.
SECONDARY WEALTH
Secondary wealth is wealth of production, or more specifically, wealth that is generated from a company’s capacity to produce more primary wealth. Examples would include, dairy producing farms, gold and silver mines, oil drillers, etc.
Primary and Secondary wealth generally make up the wealth of society’s richest people, the so-called 1%. It always has been and most likely always will be. As proof of this, look at the Forbes list of billionaires
TERTIARY WEALTH
Tertiary wealth is best described as a claim to wealth.
Examples of Tertiary wealth includes currency savings, stocks, bonds, and mutual funds.
EXAMPLES OF EACH WEALTH CATEGORY
Following are some examples that will help make each category more clear.
Real Estate Example
Primary Wealth- Owning farmland
Secondary Wealth- Owning a company that rents farmland and grows produce for sale.
Tertiary Wealth- Owning shares in a REIT (real estate investment trust)
Oil Example
Consider the following fictitious scenario that demonstrates the three types of wealth in one scenario of oil rich land:
Peter Prior owns Primary wealth in the form of Texas land, land that happens to be on top of underground oil deposits.
CEO Steve owns Secondary wealth as he owns Texas Oil Driller Corp, which has acquired the rights to drill on Peter Prior’s oil rich land.
Tommy Trendfollower owns Tertiary wealth when he buys shares in Texas Oil Driller Corp.
Gold Example
Primary Wealth- Owning physical gold bars
Secondary Wealth- Owning a gold mining company
Tertiary Wealth- Owning shares in an ETF or shares of a mining company.
WHAT DOES IT MEAN?
In summary my advice is to shift your wealth from tertiary wealth to primary and secondary wealth.
While stock shareholders would hold tertiary wealth, the downside is that shareholders are always the first losers if a company goes out of business and the last to get paid a surplus after employees, suppliers, and creditors.
Tertiary wealth is oftentimes wealth that governments produce. This also makes it the most dangerous wealth since it is stored in government created wealth vehicles (paper)-that have no real maximum on the production capacity. As we all know, time and time again governments go out of control printing fiat currencies until they all go to zero. As long as governments are printing dollars with nothing backing them up, holding dollars is the riskiest thing someone can do. Those who hold tertiary wealth will be hit the absolute hardest by the upcoming market crash.
Instead look towards storing wealth in natural/God made wealth. These are forms of primary wealth and hard assets like gold and silver, real estate, etc. Compare physical silver to creating more supply of dollars, which happens instantaneously anytime someone gets a loan, pays with a credit card or when the Federal Reserve adds more supply to market. Silver gets used in thousands of industrial applications which is reducing the supply of silver unlike supply of dollars which are skyrocketing in the opposite direction.
Many forms of tertiary wealth are directly exposed to the dollar and the governments management of the dollar. I believe the dollar will ultimately go to a value of zero, like every fiat currency in the history of the world before it. I strongly encourage transitioning into secondary and especially primary wealth. The best current option today? Buy gold and silver.
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