Why Invest in Gold & Silver?

Gold and silver has been used as money for thousands of years. 

Throughout the history of civilization, an epic battle has always been wages. It is an unseen battle, unknown by most of the people it affects. Yet, all feels the effects of this battle in their daily lives.

Let's say 5 years ago, a decent plate of nasi lemak may cost RM 2. But today, it might cost RM4, an increase of 100%. Although the process may be so slow that you almost don't realize it, but this increase in price actually did happen. It is just like the earth orbiting the sun at a breakneck speed of 67000 miles per hour but you don't feel the movement.

So when you realize that prices today are much higher than prices 5-10 years ago, 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 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.

A more recent example of fiat money losing out is Germany at the beginning of World War 1. Just before the end of World War 1, the exchange rate between gold and the German Mark was 100 marks per ounce. But by 1920 it was floating between 1000 and 2000 marks per ounce. Retail prices shortly followed suit, rising by 10 to 20 times. Anyone who still has the savings they accumulated before the war are bewildered when they found it could only 10% or less of what it could just one or two years ago.

After the war, Germany made the first reparation payments to France with most of its gold and made up the balance with  iron, wood, coal, and other materials, but it simply doesn't have the resources to make its second payment. France thought Germany was trying to weasel its way out of payment. So, in the January of 1923 France and Belgium invaded and occupied the Ruhr (The industrial heartland of Germany). The invading troops took over the iron and steel factories, coal mines, and railways.

In response, the German Weimar government adopted a policy of passive resistance and noncooperation, paying the factories' workers, all 2 million of them, not to work. This was the last nail in the German's Mark coffin.

Meanwhile, the government put its printing presses into overdrive. According to the front page of the New York Times, February 9 1923, Germany has 33 printing plants that were belching out 45 billion marks everyday! By November it was 500 quadrillion a day (yes, that's a real number).

By late October and early November 1923,  the German financial system was breaking down. A pair of shoes that cost 12 marks before the war now cost 30 trillion marks. A loaf of bread went from half a mark to 200 billion marks. A single egg went from 0.08 mark to 80 billion marks. This is the amount of money you need to buy a loaf of bread in Germany 90 years ago!

The German stock market went from 88 points at the end of the war to 26,890,000,000 but its purchasing value has fallen by 97 percent.

Only gold and silver outpaced inflation. the price of gold had gone from 100 marks per ounce to 87 trillion marks per ounce, an 87 trillion percent increase in price! But it is not price, but value that matters, and the purchasing power of gold and silver had gone up exponentially.

Here is an important lesson: During financial upheaval, a bubble popping, a market crash, or a currency crisis such as this one, wealth is not destroyed, it is merely transferred. During the Weimar hyperinflation, gold and silver didn't just win, but smashed their opponent to the ground, by delivering another devastating knockout blow to fiat currency. Thus, those who hold on to money, instead of fiat currency, reaped the rewards many times over.