Part 1: Yesterday
Chapter 1: The Battle of the Ages
Chapter 2: The Wealth of Nations
Chapter 3: Old Glory
Chapter 4: Greed, War, and the Dollar’s Demise
Chapter 5: From Deep in the Woods the Golden Bull Came Charging Chapter 6: Booms and Crashes
Part 2: Today
Chapter 7: What’s the Value?
Chapter 8: The Dark Cloud
Chapter 9: The Perfect Economic Storm
Chapter 10: Coming in from the Cold . . . To Gold! Chapter 11: The Silver Lining
Part 3: Tomorrow
Chapter 12: The Pendulum Chapter 13: Golden Castles
Part 4: How to Invest in Precious Metals Chapter 14: Beware the Pitfalls
Chapter 15: Who Are You, andWhat’s Your Plan? Chapter 16: Let’s Get Physical
Chapter 17: Everything Is Illuminated in the Light of the Past
I believe the greatest investment opportunity in history is knocking on your door. You can open it, or not . . . the choice is yours.
For the past 2,400 years a pattern has continually repeated in which governments debase and dilute their money supply until a point where the common psyche of the populace and the collective mind of a country begin to feel that something isn’t right.
You probably feel that way right now.
As the debasement progresses, the population senses the loss of their purchasing power. Then something miraculous happens. Through the free market system, the will of the public causes gold and silver to automatically revalue. In doing so, it accounts for all the currency that was created since the last revaluation.
It’s automatic, and it’s natural; gold and silver have always done this, and they always will. People have an innate sense of the rarity of gold and silver. When paper money becomes too abundant, and thus loses value, man always turns back to the precious metals. When the masses come rushing back, the value (purchasing power) of gold and silver increases exponentially.
During these events there is always an enormous wealth transfer, and it is within your power to choose whether it is transferred toward you, or away from you. If you choose to have it transferred toward you, then you must first educate yourself, and second, take action.
This book is about both education and taking action. In its pages you will find both historical perspective and practical advice about how to take advantage of what I believe to be the biggest precious metals boom ever. At first you might be surprised by the amount of history I’ve laid out here, but I assure you there is a reason to my rhyme. For it is only by understanding our past that we can truly know the present. And presently we are faced with a very rare opportunity to increase our wealth exponentially—if we are armed with the right knowledge.
This book will equip you with all you need to become a successful precious metals investor, and will equip you with the knowledge you need to take your financial future into your own hands. Enjoy.
One of the things Robert Kiyosaki always teaches at his live appearances is the difference between “content” and “context.” Content is the facts, the data, the fragments of information. Whereas context is the way someone looks at things, their point of view, the feeling that someone has about something, and the way they approach their world. It is the big picture, or should I say, it is the ability of your mind to hold the big picture. Changing or expanding someone’s context is far more powerful (and difficult) than just giving them a bunch of facts.
This book will change and expand your context—if you let it. We will explore some very “contextual” stories of how gold and silver have revalued themselves throughout history as governments abused their currencies, just as the United States is doing today. We’ll talk about bubbles, manias, and panics because every investor should have some understanding of mass psychology and dynamics. After all, it is greed and fear that move the markets.
After we’ve explored the stories history provides for us, I will show where we are today economically, which is on the brink of economic disaster, what we will call the perfect economic storm. In the United States, the recklessness with which we spend and the poor planning our government employs has created an economic momentum that is unsustainable. As you will see, our currency (the dollar) is on its way to crashing, and this can only lead to far higher values for gold and silver. Together we will study the current state of the U.S. and global economies, and the supply and demand fundamentals of gold and silver versus the U.S. dollar.
You will also learn about two of the many natural economic cycles that repeat and repeat throughout history. One is the stock cycle, where stocks and real estate outperform gold, silver, and commodities, and then the cycle reverses and becomes a commodities cycle where gold, silver, and commodities outperform stocks and real estate. The other cycle is less known, less regular, and less frequent: the currency cycle, where societies start with quality money and then move to quantity currency and then back again.
These cycles swing like a pendulum throughout time, and they provide an economic barometer for the astute investor.
The greatest wealth can be accumulated in the shortest period of time when gold and silver revalue themselves. I believe this has already begun, and I believe that this revaluation will be staggering in its economic impact as the perfect convergence of economic cycles are brewing the perfect economic storm.
These cycles that ebb and flow throughout history are as natural as the coming of the tides. And while betting against them may be hazardous to your financial health, investing with them can bring you great wealth.
This book will unfold in four parts:
Part 1: Yesterday
In Part One of this book we will study some of the lessons history teaches us about economic cycles, paper currency, and their effect on gold and silver. I will give you examples of how gold and silver have always won out over fiat currency (a fancy term for money that is not backed by something tangible like gold or silver).
I will also show you how manias and panics can change economic conditions in the blink of an eye. It is important to understand the dynamics of each because they will both play a role in what I believe will be the greatest wealth transfer in history.
Part 2: Today
In Part Two we will cover the financial shortsightedness of the United States government today, the dangerous game that the United States and China are playing with trade surpluses and deficits, and the potentially disastrous economic results. We will also see how inflation of the currency supply is not only hurting you financially, but ushering in the demise of the U.S. dollar and the economic power of the United States as we know it. Then I’ll wrap it up with the fundamentals of gold and silver.
Part 3: Tomorrow
Once we are done learning what history has to teach us, and have gained an understanding of the economic conditions we face today, we will explore how that information impacts our tomorrow, our future, and our family’s future. I’ll show you how to not only protect yourself from the coming perfect economic storm, but to also prosper from it by applying lessons we’ve learned from the past and the things the present is teaching us now. As you’ve probably guessed, this will have something to do with wisely investing in gold and silver. That’s probably why you’ve bought this book in the first place!
Part 4: How to Invest in Precious Metals
As you’ll see, and I hope come to believe, the best possible investments given today’s economic environment are gold and silver. In the last section of this book, I’ll give you some good sound advice on the ins and outs of precious metals investing.
For many, precious metal investing is an alien environment with a reputation for being populated by a bunch of kooks and conspiracy theorists— and it is to some extent. But don’t let a few bad apples ruin the whole barrel. As you’ll see, history is well on the side of these “kooks” who love their gold and silver.
Part Four will demystify the concept of investing in gold and silver. Investing in these metals is not only relatively easy, but it is also very safe.
Above all, as I mentioned earlier, this book is about changing your context. The reason precious metals investing seems so alien and out there is because there are very powerful and wealthy companies and individuals that have a vested interest in maintaining the status quo. They want you to play their game. What I mean by that is that they benefit financially by making sure you keep your money in their hands.
Precious metals essentially eliminate the middleman. They are the only financial assets that do not have to be “in” the financial system. No financial advisor gets a bonus for pushing you into them like when you buy stocks and mutual funds. One of the reasons I’m proud to be part of the Rich Dad family is because it makes a point of exposing the game that the financial industry plays with your money.
In the process they stress the importance of increasing your financial IQ by reading books like this one and others in the Rich Dad series. Once you are equipped with knowledge, you can recognize how the system plays you, and you can take control of your own financial future.
Playing their game is all fine and dandy—if you don’t care to increase your financial intelligence or to invest wisely. But when the whole system comes crashing down, don’t say I didn’t warn you. After you’ve finished reading this book, if I’ve done my job correctly, you will never be able to look at our financial institutions the same way. Your context will be changed, and a new horizon as bright as the morning sun will be before you.
I’ll see you on the other side.
Part 1 – Yesterday
Chapter 1 – The Battle of the Ages
Throughout the history of civilizations an epic battle has always been waged. It is an unseen battle, unknown by most of the people it affects. Yet, all feel the effects of this battle in their daily lives. Whether it be at the supermarket when you notice that a gallon of milk is a dollar more than it was last time, or when you get your heating bill and it has unexpectedly jumped by $50, you are feeling the effects of this hidden battle.
This battle is between currency and money, and it is truly a battle of the ages.
Most often this battle takes place between gold and silver, and currencies that supposedly represent the value of gold and silver. Inevitably people always think that currency will win. They have the same blind faith every time, but in the end, gold and silver always revalue themselves and they always win.
To understand how gold and silver periodically revalue, you first need to know the differences between money and currency.
Throughout the ages many things have been currency. Livestock, grains, spices, shells, beads, and paper have all been forms of currency, but only two things have been money. You guessed it: gold and silver.
A lot of people think currency is money. For instance, when someone gives you some cash, you presumably think of it as money. It is not. Cash is simply a currency, a medium of exchange that you can use to purchase something that has value, what we would call an asset.
As Robert Kiyosaki explains in Rich Dad’s Increase Your Financial IQ, currency is derived from the word current. A current must keep moving or else it will die (think electricity). A currency does not store value in and of itself. Rather, it is a medium whereby you can transfer value from one asset to another.
Money, unlike currency, has value within itself. Money is always a currency, in that it can be used to purchase other items that have value, but as we’ve just learned, currency is not always money because it doesn’t have value in and of itself. If you are having a hard time grasping this, just think about a hundred- dollar bill. Do you think that paper is worth $100?
The answer is, of course, no. That paper simply represents value that is stored somewhere else—or at least it used to be before our money became currency. Later we will study the history of our currency and the gold standard, but for now all you need to know is that the U.S. dollar is backed by nothing other than hot air, or what is commonly referred to as “the good faith and credit of the United States.”
In short, our government has the ability to, and has been, creating money at will without anything to back it up. You might call this counterfeiting; the government calls it fiscal policy. The whole thing is what we refer to as fiat currency.
A fiat is an arbitrary decree, order, or pronouncement given by a person, group, or body with the absolute authority to enforce it. A currency that derives its value from declaratory fiat or an authoritative order of the government is by definition a fiat currency. All currencies in use today are fiat currencies.
For the rest of this book I will use these proper definitions. At first it will sound strange to you, but it will only serve to highlight, and bring greater understanding of, the differences between currency and money. Hopefully, by the end of the book you will see that it is the general public’s lack of understanding concerning this difference between currency and money that has created what I believe will be the greatest wealth accumulation opportunity in history. What you will learn about currency and money in this book is knowledge that probably 99 percent of the population has no clue about or desire to learn. So congratulations, you will be way ahead of the game.
When I talk about inflation or deflation I’m talking about the expansion or contraction of the currency supply. The symptom of monetary inflation or deflation is rising or falling prices, which I will sometimes refer to as price inflation or price deflation. Regardless, one thing is for sure. With inflation everything gets more valuable except currency.
Adventures in Currency Creation
Fiat currencies don’t usually start out that way, and those rare cases when they have were very short-lived. Societies usually start with high value commodity money such as gold and silver. Gradually, the government hoodwinks the population into accepting fiat currency by issuing paper demand notes that are redeemable in precious metals. These demand notes (currency) are really just “certificates of deposit,” “receipts,” or “claim checks” on the real money that is in the vault. I would venture to say that many Americans think this is how the U.S. dollar works today.
Once a government has introduced a paper currency, they then expand the currency supply through deficit spending, printing even more of the currency to cover that spending, and through credit creation based on fractional reserve banking (something we’ll cover later on). Then, usually due to war or some other national emergency, like foreign governments or the local population trying to redeem their demand notes (bank runs), the government will suspend redemption rights because they don’t have enough gold and silver to cover all of the paper they have printed, and poof! You have a fiat currency.
Here’s the dirty little secret: Fiat currency is designed to lose value. Its very purpose is to confiscate your wealth and transfer it to the government. Each time the government prints a new dollar and spends it, the government gets the full purchasing power of that dollar. But where did that purchasing power come from?
It was secretly stolen from the dollars you hold. As each new dollar enters circulation it devalues all the other dollars in existence because there are now more dollars chasing the same amount of goods and services.
This causes prices to rise. It is the insidious stealth tax known as inflation, robbing you of your wealth like a thief in the night.
Throughout the centuries, gold and silver have battled it out with fiat currency, and the precious metals have always won. Gold and silver revalue themselves automatically through the free market system, balancing themselves against the fiat currency in the process.
This is a pattern that has been repeating and repeating since the first great currency crash in Athens in 407 B.C. Whenever an investor detects the beginning of one of these battles, the opportunities (according to history) to accumulate great wealth in a very short period of time are enormous.
It always seems to start the same way. Energy builds as the currency supply is expanded, and then, through natural human instincts, the coming crash is felt by the masses, and suddenly, in an explosive move and in a relatively short amount of time, gold and silver will revalue themselves to account for the currency that has been created in the meantime, and then some.
If you see the writing on the wall and then take action before the masses do, your purchasing power will grow exponentially as gold and silver grow in value relative to an inflated currency. If you don’t, you’re in for a wipeout.
These heavyweight bouts between fiat currency and gold and silver can end one of two ways:
- A technical decision, where the fiat currency becomes an asset backed by gold or silver again.
- A knockout blow that is the death of the fiat currency.
Either way, gold and silver are always declared the victors. They are always the reigning heavyweight champions of the world. But you don’t have to take my word for it. Let’s see what history has to say.
It’s All Greek to Me
Winston Churchill once said, “The farther backward you can look, the farther forward you are likely to see.” So in the spirit of Churchill, we are going to look back . . . way back to the time of the Greeks.
Gold and silver have been the predominant currency for 4,500 years, but they became money in Lydia, in about 680 B.C. when they were minted into coins of equal weight in order to make trade easier and smoother. But it was when coinage first made its appearance in Athens that it truly flourished. Athens was the world’s first democracy. They had the world’s first free-market system and working tax system. This made possible those amazing architectural public works like the Parthenon.
Indeed for many years the Athens star shone brightly. If you’ve studied your history, then you know they are considered one of the great civilizations of all time. You’ll also know that their civilization fell a long time ago. So what happened? Why did such a great and powerful civilization like Athens fall? The answer lies in the same pattern we can see time and time again throughout history: too much greed leading to too much war.
Athens flourished under their new monetary system. Then they became involved in a war that turned out to be much longer and far more costly than they anticipated (sound familiar?). After twenty-two years of war, their resources waning and most of their money spent, the Athenians came up with a very clever way to continue funding the war. They began to debase their money in an attempt to soldier on. In a stroke of genius the Athenians discovered that if you take in 1,000 coins in taxes and mix 50 percent copper in with your gold and silver you can then spend 2,000 coins! Does this sound familiar to you? It should . . . it’s called deficit spending, and our government does it every second of every day.
This was the first time in history that gold or silver had a price outside itself. Before the Athenians’ bright idea, everything that you could buy was priced in a weight of gold or silver. Now, for the first time, there was official government currency that was not gold and silver, but rather a mixture of gold or silver and copper. You could buy gold and silver with it, but the currency supply was no longer gold and silver in and of themselves.
Over the next two years their beautiful money became nothing more than currency, and as a consequence it became practically worthless. But obviously, once the public woke up to the debasement, anyone who had held on to the old pure gold and silver coins saw their purchasing power increase dramatically.
Within a couple of years the war that had started the whole process had been lost. Athens would never again enjoy the glory they once knew, and they eventually became nothing more than a province of the next great power, Rome.
And the very first regional heavyweight bout between currency and money goes to the “real money,” as gold and silver are crowned the “Heavyweight Champions of Athens”.
Rome Is Burning
Rome supplanted the Greek empire as the dominant power of its day, and during its centuries of dominance, the Romans had ample time to perfect the art of currency debasement. Just as with every empire in history, Rome never learned from the mistakes of past empires, and therefore they were doomed to repeat them.
Over 750 years, various leaders inflated the Roman currency supply by debasing the coinage to pay for war, which would lead to staggering price inflation. Coins were made smaller, or a small portion of the edge of gold coins would be clipped off as a tax when entering a government building. These clippings would then be melted down to make more coins. And of course, just as the Greeks did, they too mixed lesser metals such as copper into their gold and silver. And last but not least, they invented the not so subtle art of revaluation, meaning they simply minted the same coins but with a higher face value on them.
By the time Diocletian ascended to the throne in A.D. 284, the Roman coins were nothing more than tin-plated copper or bronze, and inflation (and the Roman populace) was raging.
In 301, Diocletian issued his infamous Edict of Prices, which imposed the death penalty on anyone selling goods for more than the government-mandated price and also froze wages. To Diocletian’s surprise, however, prices just kept rising. Merchants could no longer sell their wares at a profit, so they closed up shop.
People either left their chosen careers to seek one where wages weren’t fixed, or just gave up and accepted welfare from the state. Oh yeah, the Romans invented welfare. Rome had a population of about one million, and at this period of time, the government was doling out free wheat to approximately 200,000 citizens. That equaled out to 20 percent of the population on welfare.
Because the economy was so poor, Diocletian adopted a guns and butter policy, putting people to work by hiring thousands of new soldiers and funding numerous public works projects. This effectively doubled the size of the government and the military, and probably increased deficit spending by many multiples.
When you add the cost of paying all these troops to the swelling masses of the unemployed poor receiving welfare and the rising costs of new public works projects, the numbers were staggering. Deficit spending went into overdrive. When he ran short of funds, Diocletian simply minted vast quantities of new copper and bronze coins and began, once again, debasing the gold and silver coins.
All this resulted in the world’s first documented hyperinflation. In Diocletian’s Edict of Prices (a very well preserved copy of which was unearthed in 1970), a pound of gold was worth 50,000 denari in the year A.D. 301, but by mid-century was worth 2.12 billion denari. That means the price of gold rose 42,400 times in fifty or so years. This resulted in all currency-based trade coming to a virtual standstill, and the economic system reverted to a barter system.
To put this in perspective, fifty years ago the price of gold was $35 per ounce in the United States. If it rose 42,400 times, the price today would be just under $1.5 million per ounce. In terms of purchasing power, that means if an average new car sold for about $2,000 fifty years ago, which they did, the average car today would sell for $85 million.
This signaled the second great victory for gold and silver over fiat currency in history. So there you go, gold and silver are now 2 and 0.
In the end it was currency debasement and pure deficit spending to fund the military, public works, social programs, and war that brought down the Roman Empire. Just as with every empire throughout history, it thought it was immune to the laws of economics.
As you will see, debasing the currency to pay for public works, social programs, and war is a pattern that repeats throughout history. It is a pattern that always ends badly.