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How Gold Can Protect Your Retirement Accounts and Retirement Spending Power

In the continuously raging debate on whether paper greenback dollars or gold coins and bullion are a better and surer form of money, there are always two quotes that stand strongly on the side of gold. One is by J.P. Morgan, founder of the bank of the same name and captain of American industry, and the other comes straight from the mouth of one founding father and author of the U.S. Constitution Thomas Jefferson. Both are thought-provoking truths for you to consider when you wonder how gold can help to protect your retirement accounts and U.S. dollars’ spending power in retirement.

“Gold is money, everything else is credit”- J.P. Morgan 1912 to Congress.

“Paper is poverty,… it is only the ghost of money, and not money itself.” “I now deny [the Federal Government’s] power of making paper money or anything else a legal tender. The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin [gold and silver coins]. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.”  Thomas Jefferson

None of us could say that any better if we tried. Below are some of the alternative measures of wealth in retirement that you might be counting on and how they measure up against gold, the Godfather of value and purchasing power protection.

Gold Versus the Stock Markets

A great number of people are trusting their retirement hopes and dreams to the capricious whims and nature of the stock markets. The reliability of such a Ponzi scheme has been called into question on more than one occasion over the last ten years as the Great Recession and global financial crisis wiped away nearly 50% of the value of many pension plans and personal retirement account holdings. We have all known people close to us, family and friends, who put most everything they had in the markets, spun the wheel, and then subsequently watched it all melt down. The problem with stock market investing is that when the chips are down, too many individuals who mean well can not stand the pain any more and only want to stop the bleeding, so they liquidate all or almost all of their holdings at the rock bottom of the melt down and then watch in rising helpless frustration and mounting rage as the markets then recover while they are on the sidelines, having witnessed the rapid evaporation of literally years of savings towards their now more-distant retirement dreams.

Because of the unpredictable nature of the stock markets, often still touted wrongly as the best engine for growing your retirement nest egg, many investors who have been burned for the last time have migrated a portion of their retirement holdings over to precious metals including gold. They have wisely done this in an effort to diversify their portfolios away from the topsy-turvy rises and sometimes calamitous falls of the markets. By putting your money in gold and other precious metals, you also keep it from the clutches of not only Wall Street and their minions, but also the government and their confiscating rule-making thugs.

Gold Versus the U.S. Dollar

Many people do not fully understand how badly the U.S. government has debased the dollar intentionally over the past more than 100 years. Suffice it to say, the purchasing power of the U.S. Dollar is quickly dying. The politicos have slyly eroded such a large portion of its once-mighty value that by this year 2016 the dollar retains a shocking mere two pennies of its 1913 U.S. Dollar purchasing power. You read and figured what that means correctly if you understood that 98% of the value of the U.S. dollar 100 years ago has completely and mysteriously vanished without a trace, never to be recovered or rediscovered again.

It is no exaggeration to state that this subtle yet relentless debasement of the American dollar represents the greatest single-handed confiscation of massive wealth in the entire history of all the world. Your grandparents, parents, and now you and your children are on the losing side of this hundred year plus long trend and government-orchestrated policy. The only currency in the world that has more than kept pace with this wild depreciation (and even outpaced it considerably) is gold. The people who 100 years ago had the foresight to save their money in gold coins and bullion instead of paper dollars have amassed an enormous wealth in terms of today’s pitiful dollars. Just consider that in 1920, a one ounce gold coin and $20 bill held the same value, and back then they each purchased a custom-fit suit. Nearly a hundred years later, that gold coin still buys such a luxury suit for a man, while the $20 bill does not even make a layaway payment on the suit anymore.

A great number of investors today are suddenly realizing that the dollar has in fact consistently seen its purchasing power erode because of both government-tolerated and even -encouraged inflation and the Fed’s continuous QE Quantitative Easing (aka money printing out of thin air) policies and programs. Inflation is so very evil simply because it saps away the U.S. Dollar’s purchasing power over time. It literally means that the various important goods that you need to buy to live every day, like food, gasoline, clothing, and others, take more and more of your dollars every year to purchase. Gold is still that same hedge that it has long functioned as against both inflation and money printing programs. What is more, it not only protects your purchasing power, but it also improves it with time. This gold has proven itself to be the greatest imaginable inflation and dollar hedge in the world as you see the continuous and somewhat deliberate destruction of the various major national fiat currencies.

Gold Versus the National Debt

The national debt is yet a third arena in which gold stands out as a stalwart champion for those looking to safeguard the value of both their future retirement accounts and the dollars in which those retirements will be funded. Between Medicare and Social Security requiring more and ever larger bailouts going forward, it all amounts to a single and inescapable truth— the American national debt will continue to skyrocket. Even at present astronomical levels, many observers feel that the national debt amount is already unmanageable and unsustainable. That could lead to broader uncontrollable panic attacking the markets at any given time. This is where hard assets such as gold and other precious metals have always been seen as the best and almost unique hedge against market uncertainty.

What are the everyday faces of the consequences of such massive and rising government debt? For savers and retirees who are sitting on Treasury Notes, Treasury Bonds, or Certificates of Deposit, these stable assets only provide a certain fixed rate of return each year. As inflation eats away at the return on such assets, they are becoming less worth holding. People do sell them as their value declines, which only escalates the depreciation in their value. As such values decline, the government is required to offer greater rates of returns in the form of higher interest rates to be able to sell them at all. The real sticky point is that thanks to the enormous debt the American government now has issued, even the slightest increase in such government-mandated interest rates would cause the U.S. government to be unable to service even the higher interest on its own debt. Of course the government has a track record now of purchasing its own debt via the Federal Reserve by printing the dollars to do so as it needs more buyers than are available for the Treasuries.  This is not what you call a long-term sustainable situation.

In Conclusion

Remember that practically every county in the world (besides Switzerland) operates using the flawed system of fiat money, or money whose only value comes from faith and trust in the government that issues it. The glossary gives a more ominous definition for fiat money as that money that is useless intrinsically by definition and is only useful as a medium of exchange. Many investors and savers for retirement feel deep down inside that these three severe problems could wipe out their savings and retirement plans over time. This is why gold coins and bars always have represented and continue to represent the best, last, and really only hope for an effective defense against the capricious and unpredictable nature of the stock markets, the constantly depreciating U.S. dollar, and the government’s runaway spending and uncontrollable national debt growth policies. The words, “every man for himself, run for your lives” have never been truer before than they are today, here, and now.

Wesley David

Wesley David is an American published author with decades of experience in financial writing. His areas of expertise include precious metals, commodity investing, economics, international relations, history and more.

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About Wesley David (9 Articles)
Wesley David is an American published author with decades of experience in financial writing. His areas of expertise include precious metals, commodity investing, economics, international relations, history and more.