Wednesday, April 13, 2011

Money will be backed by gold in a few years. This has happened in the past, read this to understand and prepare yourself...

Back in the old days you could buy a gallon of gasoline for a quarter. Well nowadays you can buy a gallon of gasoline with a quarter too. You must be thinking I am crazy but its true, that's if you had a silver quarter in your pocket.

In the old days... pre 1968 era our currency was made out of precious metals. Mainly silver in Canada and around the world. After 1968 in Canada the government began to make the currency out of less valuable materials like nickel and copper, now todays coins are made out of steel - even more worthless.

A silver quarter can still buy you a gallon of gasoline today, the exact same as it did back in the old days when we were on a "gold standard". This means our money was actually made and backed by gold and silver precious metals.

Since coming off the gold standard about 50 years ago, the debt's of nations and the people have been piling up and growing at exponential rates.

Debt-to-GDP ratio

Once the link between gold and money was non-existant the banks were able to "print" as much money as they wanted, this has destroyed the value of paper money nowadays. Inflation is stealing any savings that is accumulated over the years. You can see as money becomes less scarce as in the case of "paper" money - debts become uncontrollable and we have problems like we had back in 2008 when the total economy collapses because bubbles are formed in different sectors of the economy. Housing in the case of 2008.

So what does this all mean? If you take a look at the next chart it shows you the price of the S&P 500 in terms of gold. Not in terms of US dollars.

S&P 500 priced in GOLD

As you can see the stock market has been going down for close to 10 years now when you price it in gold. In silver it has went down even further!

In conclusion you have solid proof that the value of your paper dollars is actually losing value everyday because simply there are more of them to go around and they are not backed by anything with value.

The only way to protect yourself is to invest your money in things that appreciate in real terms