07
Aug 2024
Trump Warns Loss Of Dollar Value Biggest Defeat In 200 Years
Donald Trump’s message to Americans is increasingly aggressive in directing citizens to redirect their savings out of dollar denominated investments. The savings and investment choices he is referring to as irreparably vulnerable include checking accounts, savings accounts, CD’s, T-Bills, corporate, municipal, and treasury bonds as well as the risk to life insurance policies.
His words did not even touch on the vulnerability of the stock market where multiple events from Warren Buffett’s newly negative view of tech shares to Intel's 25% one day drop, to the nation of Japan’s 20% market correction in one week - all suggest caution is warranted. President Trump has now given multiple speeches addressing this topic and he is calling out the advice of America’s financial advisors.
President Trump gave a high-profile speech at a Bitcoin conference suggesting it is almost a necessity for Americans to get out of dollars and invest or save in other asset classes. In a less publicized speech Trump said:
“The USA is a mess, our economy is crashing, inflation is out of control. Russia has joined with China. Can you believe it? Saudia Arabia has joined with Iran. China, Russia, Iran and North Korea have formed together as a menacing and destructive coalition. Would have never happened if I were your president. Nor would the war with Russia attacking Ukraine have happened – all of those lives would be saved; all of those beautiful cities would be standing. Our currency is crashing and will soon no longer be the world’s standard. Which will be our greatest defeat frankly in 200 years. It will take us away from being a great power.”
Trump’s words are a resounding challenge to the advice of financial advisors who position American families with their flawed view that the US T-bill is the safest asset. Trump is pounding the table that this advice from financial advisors will prove devastating to families as advisors are putting their firms’ interests ahead of their clients' interests.
The debate du jour is gold or bitcoin? The answer is gold and bitcoin are completely different asset categories. Investors should think of saving in gold vs. investing in bitcoin – The difference is significant. Bitcoin is an investment. An investment such as Bitcoin may work out fabulously, but it may not. Buyers beware. Gold is savings. Gold may not be the highest returning asset, but thus far in 5,000 years of financial history it has been the safest savings vehicle. As a result of gold’s unique track record, while there are no guarantees, the chances are high that gold will succeed in preserving wealth for at least another twenty years.
When the dollar crashes as Trump is suggesting is inevitable, and as history agrees is inevitable, Americans will understand the critical nature of gold. Think forward for a moment based on hundreds of examples from history:
Imagine the inevitable day when the dollar has lost its value as all paper currencies have done and realize this is exactly what America’s brilliant founders predicted would happen if our leaders ever led the nation from gold and silver as our only currency.
Envision you are a merchant in the future, selling something. You want to sell your goods, especially if they are perishable items such as food. What will you accept for your goods? Remember the dollar no longer has stable value. What will customers offer for payment?
· If you barter, i.e. accept another good for the good you are selling, it will be highly inefficient. Why? If someone wants your goods and they offer you shoes, once you have enough shoes, you can no longer trade with them. You have what others want but you do not want, and others have what you want but do not want what you offer.
· If you barter, i.e. accept another good for the good you are selling, it will be highly inefficient. Why? If someone wants your goods and they offer you shoes, once you have enough shoes, you can no longer trade with them. You have what others want but you do not want, and others have what you want but do not want what you offer.
· A new currency will be needed because investors are always content to accept currency for payment. What will the new currency be? The new dollar? The new digital dollar? The new crypto? Can you be sure?
Now pause for a moment and consider finance is the science of money and it is built on probabilities. With literally millennia of track record testifying that every time there has been a paper currency transition, gold and silver have returned as currency of choice! Do you know what the probability is that gold will retain value in our future? Suffice to say the probability is high.
Do you think that may be why central banks who make our current and future currencies around the world, are building stockpiles of gold?
Think about even the new BRIC currency, an alternative to the dollar gaining rapid share. Do you really think there will be harmonious agreement among all those nations as to how the appropriate percentage of the new currency should be attributed to each nation? History says it will be more like a food fight among the countries than a symphony as their self-interests push them to negotiate and re-negotiate until the next currency breaks. Russia wants this. Saudi wants that. China wants something else. However, gold is already accepted by the BRIC nations as currency – it is a no brainer among the BRICs as nations are happy to accept gold for payment knowing that it will gladly be accepted by other nations.
As JP Morgan famously said: “Gold and silver are money. Everything else is just a credit [an IOU].” Not only historically has gold preserved value, in times of stress, gold has smashed modern financial models which suggest low risk assets generate low returns. Why? Consider the demand for easily recognizable currency in times of currency transitions such as the dollar’s loss of stability. Everyone wants a currency that will preserve value and be easily recognized. Gold has been recognized globally for millennia and is recognized globally today. But there is a catch – Gold is only 1% of global wealth.
So, as many other assets become less valuable without an efficient currency for commerce, the best-in-class currencies are historically more valuable on a relative basis. Think about the economics – what if 99% of wealth that is not in gold decides it wants just 1% of its wealth in gold?
That incremental 1% of demand is equivalent to the entire above ground reserves of gold.
Historically safe money gold has become far more valuable on a relative basis than most other assets during currency stress.
The dollar’s decrease in purchasing power in our lifetimes has been dramatic but measured. History suggests the dollar’s loss of value will accelerate in the years ahead. But even if the dollar’s decline simply continues on its current trajectory, have you considered the impact saving in gold vs. saving in paper currencies would have had on your family when it comes to buying a real asset? Consider real estate as an example:
· The median US home price in USD rose from $25,225 in 1971 to $457,475 in 2023. An Investor needed 18x as many dollars to buy the median home today.
· The median US home price in 1971 required 721 gold ounces to purchase. In 2023, the median US home required only 250 gold ounces.
· An investor needed 65% less gold today to buy the median home
· An investor can buy the equivalent of three homes today with the same amount of gold needed in 1971.
History is also clear – it is not sufficient to say you have a token amount of gold and silver relative to your worth. You need an appropriate allocation if you wish to preserve the wealth of your family during a currency transition such as Trump is saying is inevitable.
Beware of gold companies affiliated with talk radio and national programs.
We consistently see their wounded clients coming up for help having been deceived into buying “special collectible” gold that is anything but special. Investors need lower premium, easily recognizable bullion… and that is our focus. Call our team and we will make it easy for you to transition a portion of your retirement savings or taxable savings into physical gold and silver.
Don’t be a deer in headlights full of fear. The current moment is an easy environment to properly protect oneself.
God bless and God bless America.
