November132011

Remrie’s Two Bits About Your Two Cents

This is going to be a short lesson about money.

Most people know what money is. It’s easy to make, and easier to spend; however, most people cannot comprehend what money is. This is a short lesson to help you comprehend what money is, and what it isn’t. Always keep this in mind when you hold a fist full of change……

 
I regularly purchase silver bullion, and I recently just purchased one of those $10 vials of water with 24 karat gold leaf flakes stirring around in it you typically get at a gift shop in Arizona or New Mexico. Since I got that, I got that to remind myself of this lesson, I realized it will be more valuable to share this lesson with you.

Most people know the difference between “fiat currency” and “money”, if you don’t the simple difference is this….

  1. Fiat Currency: A currency with no tangible value used to facilitate trade. “backed by nothing”. Typically in the form of paper with words defining its value as “Backed by the full faith and credit of (country)”. Or in other words, the value is as good as their word.

  2.  Money: An object of tangible value used to facilitate trade. The value is based off of a tangible use for the object beyond trade alone; such as in jewelry, electronics, decorations, tools, etc…

This is not limited to paper dollars, gold, silver, copper, nickle, etc… Everything can have both tangible value, and subjective value.

 


The key lesson is this…..
Get a old penny.
Look at it, hold it, if you got a bunch of old ones of the same year feel how heavy they weigh combined.

Now do the same with a new penny.
If you got several new pennies of the same year feel their weight compared to the old pennies.

Notice a difference?

If you get some of the first pennies there ever were, they were solid copper… And copper is heavy. Over the course of American history which isn’t long, even in the past 50 years, let alone 100 years, the coins you hold in your hand have been diluted in their copper content. They go from 100% copper, to 75%, 50%, 25%, and now even less. And replace that copper with cheaper metals, like zinc, aluminum, maybe someday even plastic.

The term for this is “Debasement”. To debase a currency is to devalue it, and replace it with cheaper representation. Just as now a 50 cent piece used to be 100% silver, now they contain very little silver at all. Same thing for the gold and silver dollar coins.


I talk about coins because coins are both money, AND currency at the same time. The metal has a tangible value. They can be melted down and used for something else. But the currency they represent is subjective based off of the confidence people have in the nation.

This is also why governments have to debase their money supply.

When the value of the metal goes up, it eventually will exceed the value of the currency it represents. A gold dollar is not worth $1, anymore…. $1 is worth $1… But $1 gold coin is worth $1,300+…. My $1 American Eagle silver coin is worth more than $30.

 Which brings me to the key question I want you to ask yourself every single day…..


If the value of the metal always has, and always will become more valuable than the coin, why should I be saving coins?
Coins being the currency…. When we save money at a bank, we are saving dollars and coins. Everyone talks about “saving money” what they are really saying is that they are “saving currency.”

Historical charts aren’t really needed. Over the short term there is a difference between metals and currency gaining or losing value against one another. But when you save money, real metal. If the copper in your penny always has, and always will become more valuable than the penny, does saving copper sound like a better idea than saving pennies? Does saving gold and silver dollars sound like a better idea than saving paper dollars?

I can get into the more technical details a lot more, but I want to keep this simple.

The paper dollar has almost no tangible value other than the artwork imprinted on it. The new gold dollar coins that came out that look like brass pretending to be gold have tangible value in the metal, but it’s so cheap it’ll take it a while before the metal in that coin is worth more than $1. Which Once it does, the U.S will debase it.

If your goal is to save -money- for retirement, which might be 20 - 40 years away, although that is a very short term investment for metals, saving metals by default is consistently more likely going to retain its value. How much was the dollar worth 20 - 40 years from today? a lot more than it is now…. Let alone $100+ years. Which is why if you want to save money for future generations, you need to give them something of -tangible- value that you can save and hold onto. Because paper currencies like the USD, Euro, Yuan, Yen, etc are not forever…. The USD has switched every 25 - 40 years, it’s already overdue to change again, and people are promoting the Amero or some SDR issued by the IMF… When these currency changes happen, the dollars “currency” you saved become greatly devalued.

As a business person and investor, I don’t have a 401k or IRA… I have raw land, gold, silver, real estate properties, etc… Because when you control something tangible, you have something that will be worth what it can be used for… A paper USD dollar cannot be used for anything other than to save or spend. If the government that issues it rejects it, then you are SOL… Just like with the 100 trillion dollar Zimbabwe notes…

Now look back at your pennies…. Would you rather be working hard to earn and save copper? Or would you rather be working hard to earn and save pennies?

I can’t predict what will happen with the world economy, but you have to choose where your financial loyalty lays. In the government who “has your best interest at heart”…. With your currency “backed by the full faith and credit” of an uncle you never met?…. Or in a piece of gold, silver, copper, dirt, food, water, fuel, etc that is worth the same as any other piece of gold, silver, copper, dirt, fuel, water, fuel, etc on the other side of the world?

We have God to give us faith…. We need tangible things for wealth.
Otherwise it would be “In Uncle Sam We Trust”. 

And don’t forget, those paper stocks you buy on the stock market, those are fiat paper notes just as much as the USD. A paper stock in a gold mining company is not worth the same as holding a piece of gold in your hand. The GLD or SLV exchange trade funds that “represent” gold and silver are NOT gold and silver.

Tangible is what you physically see, hold, touch, taste, smell…

If you happen to be at one of those gift shops that sell the gold flakes in a vial, buy one, keep it with you… Think about this lesson. And think about the financial future you want.
______________________________________________________________________




Beyond that, on a personal note…
I personally won’t trust my wealth to be “backed by the full faith and credit” of any nation, president, banker, broker, agent, friend, or family… In God I trust, in gold, silver, dirt, and houses I protect myself financially. The only paper cash I have is to spend. 

My goal isn’t to teach you how to save money to get by. My goal is to teach you how to make money to thrive… Suzy Orman and Dave Ramsey will teach people how to cope with money, but they won’t teach people how to master it.

They teach you how to cope with not catching enough fish no matter how hard you try… My goal is to master catching fish! 

(Source: Wikipedia)

Page 1 of 1