Financial Security in an Insecure World (part 2) | The Gold Standard #2213

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This episode is part two of how to have financial security in an insecure world.

Inflation continues to rise, and now the Fed has introduced rising interest rates into the mix (for the first time in several years). Even for the most casual observer, it’s clear that the US economy is not as strong as it appears. As we continue to move into the third and fourth quarters of 2022, this will become more apparent. The stock market is chaotic with uncertainty driving volatility across the board.

Inflation remains a growing problem. We anticipated inflation to continue its upward trajectory. February consumer spending was below expectation because of the higher price tags on everything. Spending isn’t the only thing that’s more modest than expected. GDP growth is expected to be slow for the rest of the year.

This program reminds us that inflation erodes the value of a currency. There’s all indication that price hikes will continue into the following year. Volatility in the bond and stock markets will continue until clarity shows up on the horizon. Right now, the only clarity is in precious metals.

Precious metals derive value from their scarcity. Currencies can be printed by central governments whenever they feel like it. Consider the policies of many governments to store gold as part of their official monetary reserves. These countries use gold as an insurance policy against unforeseen events like currency collapse.

Ken talks about the quantity of gold and points out in this episode, “Supply is already at full capacity. If demand increases, there’s not enough to go around.” This will make acquiring gold much more challenging to obtain and much more expensive to buy when you do find it.

The performance of gold is a reflection of risk in the financial system. Currently, gold is tremendously undervalued compared to the amount of government debt. The good news is that this represents a good buying opportunity, but this buying opportunity will not be available indefinitely.

Even with Big Money moving into gold and various countries increasing their stockpiles of the precious metal, the spot price of gold is still within reach.

There is still time. Gold hasn’t moved to compensate for the recklessness of the world’s central banks, but gold will reconcile the accounting just as it has done for thousands of years.

One of the characteristics of gold that make it such a reliable store of value is that there is only so much of it. The spot price can be manipulated, but nobody can make more gold. There is only a finite supply of gold that comes from the Earth.

The Federal Reserve prints currency at will. While injecting a lot of cash into the economy can cause inflation, it gives federal member banks more credit and lowers the federal funds rate.

The featured gold product for this episode is a series of gold coins minted between 1907 and 1933. We’re talking about the famous Gold $20 Double Eagle designed by legendary 19th Century sculptor Augustus Saint-Gaudens. The Saint-Gaudens Double Eagle series has tremendous numismatic importance and is considered one of the most beautiful designs in the history of United States coinage. Since twenty dollars could buy a great deal back in the early 20th Century, the Saint-Gaudens Double Eagle did not see heavy use in daily transactions. More common usages included payment for large transactions, such as real estate contracts or settling international trade deals.

The production of the Saint-Gaudens Double Eagle almost didn’t happen. The old guard at the US Mint, led by Charles Barber, tried everything they could to prevent its success. Never before had an artist outside the mint’s inner circle designed coinage for circulation in the US. The Saint-Gaudens Double Eagle series exists because of President Teddy Roosevelt’s determination and force of personality. President Teddy Roosevelt considered American coinage “atrociously hideous.” He meant to revitalize the whole thing with new art sculpted by Augustus Saint-Gaudens, who was considered the greatest sculptor of his day. The entire project was, after all, the President’s “pet crime.”

During the discussion, Ken draws startling parallels between what the Saint-Gaudens Double Eagle could purchase when they were first circulated to what they can buy today. It’s a sobering reminder of just how much our currency has become devalued over the last hundred years.

The design of the Saint-Gaudens Double Eagle series might seem somehow familiar; that’s because the obverse was reused for the 1986 Gold American Eagle program.
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