Like any good quote, this one just gets more true every year:
“Invest in inflation. It’s the only thing going up…”
– Will Rogers
No surprise, then, that the idea of returning the USA to a gold standard is again under public discussion. This is especially true on the red side of the aisle.
However, whether left or right, all politicians agree that inflation is real and working against average Americans every day. Can your retirement assets withstand inflation’s devastating effects?
Ted Cruz has clearly been the strongest advocate for a gold standard fix. “We need sound money,” he said at the October 28 GOP debate hosted by CNBC. “I think the Fed should get out of the business of trying to juice our economy and simply be focused on sound money and monetary stability, ideally tied to gold.“
EXPLORING THE GOLD STANDARD
Under a gold standard, the USA would peg the value of the dollar to a set amount of gold, allowing investors to trade dollars with the government for physical gold coins or bars. Some experts believe that this could prevent the boom and bust cycle that the US economy has experienced since abandoning the gold standard in 1971.
Cruz echoed his supportive statements in a November debate: “We had a gold standard under Bretton Woods, we had it for about 170 years of our nation’s history, and enjoyed booming economic growth and lower inflation than we have had with the Fed now.”
In a 2015 television interview, Donald Trump said: “I like the gold standard… We used to have a very solid country, because it was based on a gold standard, but we do not have that anymore. There is something very nice about the concept of that.“
In addition to Cruz and Trump, we have also heard Rand Paul, Ben Carson, Jeb Bush and Mike Huckabee express confidence in the solidity that returning to a gold standard could provide.
Why? The answer is simple.
INFLATION SLOWS UNDER THE GOLD STANDARD
Historically, the United States has enjoyed lower levels of inflation while operating with a gold standard.
In 1971, when Nixon took the United States off the gold standard, inflation stood at 3.3%. By 1979 it had risen to 13.3%! In a study of 15 countries from 1820-1994, a Federal Reserve report found that average annual inflation under a gold standard was 1.75%, versus 9.17% when not on a gold standard.
In fact, from 1971 to 2003 the dollar lost almost 80% of its purchasing power. Consider that by 2011, the dollar was so debased that had the same purchasing power as 19 cents did in 1971!
Regardless of where you think gold might head in the next month or five years, remember that its greatest value still lies in protecting your wealth against market volatility and inflation’s effects. This is something no news headline, whether positive or negative, can change over the long term.
When inflation hits… will your retirement plan be ready in 2016?
BE READY: DEFEND AGAINST INFLATION WITH A HOME STORAGE IRA
It is a prudent time to rethink what your financial future might look like if inflation continues to eat away at your paper assets.
In times like these, having a little gold or silver in the home safe is of considerable comfort to anyone, regardless of your exact view of the markets ahead, your political leanings or even your age
