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Power to the People – Owning Gold and Silver to Weather the Monetary Storm

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company-addison-qualeThis article was submitted by Addison Quale, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.

Perhaps you saw the recent article about home safes selling out in Japan. This is an unintended consequence of the Japanese central bank’s negative interest rate policy. People are starting to pull their paper cash out of the banks. They are withdrawing all they can and buying personal safes to horde currency at home. The reasoning is, of course, why leave your cash in the risky banking system when you get zero return from it sitting there? In truth, Japanese banks are slowly sucking their depositors’ wealth away – charging them for the right to lend them money.

Interest rates have been falling for 30 years here in the US and this trend shows no signs of abating. To wit, Janet Yellen and the Fed recently raised the federal funds rate in December. Since then interest rates have still fallen lower.  These continuously falling interest rates are a clear indicator that our monetary system is collapsing. In fact, negative rates may well be right around the corner in the US.

As many of you are already aware, fiat currencies don’t last forever. They are essentially glorified pyramid schemes of government debt. As respected as the US dollar is in the world today, it is no different. It too will collapse, just as every other fiat currency has.

The good news is that people can, to a great extent, protect themselves from this deception and the theft of their money by “opting out” of the fiat currency system. The way to accomplish this is by owning real money: physical gold and silver.

This got me thinking recently – as these fiat currencies come tumbling down, millions will be devastated financially. But some will fare better than others. So this raises a question: which citizens of the world today are best situated to endure this economic collapse?

It stands to reason that private citizens in countries with the easiest access to physical gold and silver will weather the storm the best. Even if it’s in the form of jewelry, people who have physical precious metal in their possession will be much better off as the fiat currency regimes collapse. This is because they will have access to a zero, third-party money that can at least keep the economic wheels turning. In this sense, private ownership of gold and silver really is power to the people.

When I ask, “Which countries own the metal?” I’m not referring to their governments. By that measure, the US leads the way with over 8,000 tons in reserve. We know government elites have their gold stashes, but that doesn’t mean the private citizens will gain any benefit from them. Government gold holdings will most certainly just be used for the benefit of government elites. That’s just how government rolls, after all.

The important question when it comes to economic security is where do everyday people hold gold?

This this infographic shows world gold demand and gives a good indication of where people value and invest in the yellow metal.

gold infographic

As you can see, there’s really no contest. India is the king of total gold consumption. China is not too far behind. And the US is a distant third.

On a per capita basis, it comes to an estimated .018 troy ounces per Indian per year, .017 troy ounces per Chinese per year, and a whopping 1.382 troy ounces per American per year. So all in all, Americans still bring in more gold on an individual basis per year than Chinese and Indians.

That being said, a recent article in the Wall Street Journal pointed out that Indians still may be the largest private holders of the yellow metal. Conservative estimates are that there are over 15,000 tons of gold held in private jewelry stashes by Indians. Per capita that would come to .371 ounce per individual in the country.

How do China and the USA stack up? It’s hard to say. As these are all just guesstimations. People tend to keep their gold holdings under tight wraps – both bullion and jewelry. But given that people in Western nations have generally abandoned their physical gold investments for paper instruments, it’s possible that Americans just don’t have as much real money at home as they used to.

In many countries in Africa, Latin America, and the Middle East, it’s nearly impossible for people to buy gold. In some cases, dealers won’t sell due to security reasons, and in many nations, taxes, duties, and onerous regulations keep gold and silver out of the hands of everyday people. For example, last year SchiffGold sold a 5 gram gold bar to a client in Brazil. He had to pay over 100% VAT tax. This makes it very hard for Brazilians to own physical money.

The big takeaway is when this house-of-cards fiat currency regime comes crashing down, the individuals of only some nations are going to be well-situated for the impact. These would seem to be those which have a very deep tradition of owning the metal – namely India and China. Citizens of other nations with governments that have made it nearly impossible, or at least very expensive, to buy gold and silver are going to be in much deeper trouble.

Meanwhile, for all of its recent economic difficulties, the US still stands tall as one of the few nations on earth where it’s totally legal and easy to buy real physical money – gold and silver. That means Americans at least have the opportunity to weather the coming financial storm pretty well.

As for the Japanese buying up safes to stuff with paper yen – they would be much better off filling them with actual money – gold and silver.


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3 thoughts on “Power to the People – Owning Gold and Silver to Weather the Monetary Storm

  1. Leo says:

    Addison, sorry to tell you that you made a 100-to-1 clerical mistake on the “whopping 1.382 troy ounces per American per year”. Computing this ratio on the total population of the USA, as you apparently did for both India and China, the result is even smaller than in India(.018) or in China(.017): the average american buys only .014 Tr.Oz per year!

    • Addison Quale says:

      Hi Leo,
      So sorry I missed your comment. You’re partially right. I did miscalculate such that the US level of per capita buying should not be 1.382 oz but actually .1382 oz. (it’s a 10-1 mistake I believe). So the US per capita still does buy more per capita than China or India.

  2. Robert Greenwald says:

    Being the government in 1933 passed a law stating it was unlawful to Americans to hold gold, what would prevent this from happening again?

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