Gold Could Save Your Life
Gold is up. Way up.
I’m not talking about in the US. I’m talking about Venezuela. On July 30, an ounce of gold was going for 211 million bolivars. That’s a 3.1 million percent increase from the beginning of the year.
We’ve said before that inflation is good for gold. The hyperinflation in Venezuela demonstrates this truth by offering us a glimpse into the most extreme situation. It teaches another lesson as well.
Gold could save your life.
The IMF projects inflation will hit 1,000,000% in Venezuela by the end of the year. Right now, prices double about every 18 days. President Nicolas Maduro tried to solve the problem by lopping five zeros off the country’s currency. Of course, that won’t fix anything. You don’t undo the impact of socialist policies and government mismanagement with accounting tricks.
Last month, a cup of coffee set you back 2 million bolivars in Caracas. Of course, even if you had that much currency, you would probably have a hard time finding a cup of coffee. Venezuelans have suffered extreme shortages for years. Grocery store shelves are empty. People have had to turn to the black market just to survive.
As Frank Holmes said in an article published by Forbes, at some point, hyperinflation gets so ludicrously out of control that discussing exchange rates becomes pointless, but it underscores a very important truth.
My point in bringing this up is to reinforce the importance of gold’s Fear Trade, which says that demand for the yellow metal rises when inflation threatens to destroy a nation’s currency—as it’s doing right now in Venezuela. A Venezuelan family that had the prudence to store some of its wealth in gold would be in a much better position today to survive or escape President Maduro’s corrupt, far-left regime. In extreme cases like this, gold could literally help save lives.”
Many Vietnamese people who escaped that country in the wake to the Vietnam war can tell you this from experience. People who had the foresight to buy gold managed to get out. An adult could get a seat on one of the boats fleeing Vietnam for between 8 and 10 taels of gold. (A tael is just over one ounce.) A seat for a child went for about 4 to 5 taels. As Holmes put it, gold was the passport out of Vietnam.
Thanks to the precious metal, tens of thousands of Vietnamese ‘boat people,’ as they’re now known, were able to start new lives in the US, Canada, Australia and other developed countries.”
We tend to look at stories like this and think, “That could never happen here.” But I’m pretty sure a lot of Venezuelans would have said the same thing just a couple of decades ago. A recently as 2001, the country was the most prosperous in South America. Remember when American reporters were gushing over the “socialist miracle” in Venezuela?
Lesson: any economy can be wrecked.
While the United States may not face the kind of hyperinflation plaguing Venezuela, there are plenty of signs of trouble in the US economy. As Peter Schiff said in a recent podcast, we may well be heading for a bigger crisis than 2008 and yet the same people who were clueless then are clueless now.
You might never need gold to buy your escape. But it could help you preserve your wealth during the next financial crash. Wouldn’t you rather have gold than a bank account full of rapidly depreciating dollars? And in the most extreme case, gold could serve as your lifeline. Do you have enough?
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Photo by: Diariocritico de Venezuela via Flickr