Gold Speculators or Prudent Gold Savers?

by Wes Bridel on October 28, 2011

in Stewardship

We’re continuing a series on gold and silver which began here.  This is part of a letter written by myself and the board of an association to list the reasoning behind moving some of our US Dollar savings to gold and silver to protect ourselves from risk in the fiat US Dollar.  The point is that we are not speculators, but attempting to be prudent savers in gold…

…But it misses the point to say that we think the value of gold will go up.  We are not speculators.  We are not investors.  We, the board of this association, are entrusted with the duty of managing the affairs of the property and all related accounts.  This very importantly includes savings.  I would venture to say that gold mining  stocks are a much better speculation today than gold (and the same can be said for silver miners).  Were we speculators, we might buy these instead.  But we are not.

Instead, we are making this change in allocation in order to protect our savings.  If the economy recovers, the government gets its books in order, and the value of the Dollar rises….gold and silver could easily fall in price.  If this were to happen (as discussed at the annual meeting), we might temporarily lose a portion of the value of our gold and silver holdings when measured in US Dollars.  They would certainly not go to zero as gold and silver always have value, but the value could certainly fall from the current amount to something less than that.  However, we would still have the 85% in our savings accounts held in US Dollars.

On the other hand, if the value of the Dollar were to drop considerably and the 85% which we have in Savings were to begin to not be enough to comfortably cover our expenses, the value of our 15% gold and silver holdings would strengthen in such a measure as to make up some or most of the shortfall that we were experiencing.

There have only been 3 major studies on hyperinflation that I’m aware of.  Each approaches the topic from a different angle and comes up with a different approach to measuring the likelihood of a country seeing the value of their currency hyper inflate away to nothing.  Although each of these measures is different, according to all 3, the US has passed the point of no return and will see the value of its Dollar decimated.  Such events only happen to a world reserve currency about every 60-100 years (just long enough for the people remembered what went wrong the last time to have died off and for those who remain to repeat the mistakes).  However, the world is now due to see this phenomenon repeated.  This is in no way a proof to say that it will happen, but simply a reminder that it would be the height of hubris to think that it could never happen here (this is what all people in all time periods and places believe).  We therefore concede that it might possibly happen (especially when we consider the facts of the country’s current condition as partially alluded to above along with the fact that many of the world’s countries, on whose lending the US is dependent on, are repeatedly calling for this exact scenario to be carried out.)  If in this worst case scenario were to play out, almost every owner of SPS would be in dire straits and in no condition to answer a capital call.  Likewise, the 85% US Dollar cash currently in savings would be wiped out and worthless.  However, the value of the current 15% held in gold and silver should appreciate to such a point as to perhaps entirely replace the current level of savings held in the savings account.

We do not claim to know the future.  Any one of these scenarios is possible.  However, we take our responsibility as stewards of the resources of the association seriously and thus request that you take the steps necessary to allocate 15% of the association’s cash funds to the silver and gold fund mentioned to provide us the diversification of savings and hedge against the risk we currently hold by keeping our savings 100% in USD.

This is the 6th post in a series on silver and gold.  You can find all posts from this series at:  1) Gold & Silver on Sale, 2) Reasons to Buy Gold & Silver,  3) Gold & Silver: About to Take Off?,  4)  Why & How to Buy Silver & Gold?,  5) Gold Bubble?,   6) Gold Speculators or Savers?,   7) Gold Article Rebuttal, &  8)  Gold Rebuttal Pt 2.  Watch the previous economic update video series we did at: 1)  Europe Economic Update 1, 2) Europe Economic Update 2, 3) Europe Crises Explained, 4) World Economic Update, 5) US Economic Update,  6)  US Economic Update 2,  7)  US Economic Update 3,  8)  Hyperinflation Signs,  9)  Hyperinflation, Inflation, or Deflation?,  10)  Gold Update,  &  11)  Gold & Silver Update.

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