When Money Dies, Some Will Prosper

“When the currency system as we know it dies, some people will become very wealthy,” begins a special report from the Casey Research/Sprott Inc. Summit, When Money Dies. It’s an attention-getting lede sentence, and a sentiment that will sound quite familiar to readers of WealthCycles.com and the writings of Michael Maloney, who was a presenter at the Casey Research Summit held earlier this month in Phoenix.

The report transcribes a roundtable discussion between Rick Rule, founder and chairman of brokerage firm Global Resource Investments, and two Casey Research editors, Louis James and Marin Katusa.

Asked by the moderator “who killed money,” Rule replies:

The answer is in an old Pogo Cartoon that reads: "I have seen the enemy and he is us." Collectively in the West, we have lived beyond our means for a substantial amount of time. We rely on a government that we have paid to steal from our neighbors. Money is how we deal with transfers. Dealing with transfers dishonestly by making more of the medium that isn't backed by any value is the process by which money dies.

But even though, as Rule continues, “It is likely that the purchasing power of Western currencies will lose 5%–7% compounded for a long while, maybe until they go extinct,” opportunities to build and preserve wealth still exist. Says James:

Tremendous money creation is going on. This has economic consequences. The guy at the supermarket can see it even if his house is worth less. It is the worst of all possible models. Necessities cost more, but once trusted assets—the store of wealth in real estate and pensions—are depreciating. This has investment and economic consequences. The government is creating all this money and blowing it out the window. You have to figure out where to stand with a net.

But how do you know where to put your net? the moderator asks. James replies:

It's all about stuff. Stuff people need is, in general, good when paper or theoretical money is bad. In certain asset classes, including real stuff, there will be price destruction. Real estate, for instance, still has a speculative side to it and has not yet bottomed. But fundamentally, real stuff that has value can't just blow away. The world will go forward. People will need food and raw materials. Gold is another vehicle with intrinsic value. These things can't be inflated out of existence. When prices on valuable stuff goes down ridiculously, that should be seen as a godsend. People will still need copper, steel and timber. Buy when that stuff is priced low and wait for it to go high, then sell.

As Michael Maloney wrote in his 2008 book, Guide to Investing in Gold and Silver, and again more than a year ago in the WealthCycles.com article, True Value Is Priceless, the only way to determine the true value of a thing is to measure it against something of intrinsic value. Paper currency is dying because it has no intrinsic value beyond the paper it is printed on. Its value is an illusion, based on nothing more than how much governments and central banks determine it is worth—and they continually reduce its value by continually increasing the currency supply. As Mike writes:

Don’t use price, i.e. the dollar, to measure value. The dollar, and any fiat currency, lies. Again quoting from my book, Guide to Investing in Gold and Silver, “…the dollar is simply a smoke screen that obscures true value, and that allows the Fed to legally steal from your back pocket while patting you on the shoulder and telling you they'll make everything all right.”

The true measure of the value of an asset, such as gold, is how much of that asset it takes to obtain the things you want—a house, a new car, a loaf of bread.

When people ask me how high I think the price of gold or silver will go, they’re asking the wrong question. The question to ask is how much of things of value—food or houses—will an ounce of gold or silver be able to buy…. [G]old and silver are vastly outperforming the dollar. They will only continue to rise in value as stocks, real estate and currency continue to fall.

Once the world’s population wakes up to the way in which its wealth is being stolen by the constant devaluation of the global currency system, that is when the world will turn en masse to the currency it turns to every time fiat currencies die—gold and silver. Those who “will become very wealthy” will be those who are positioned on the right side of the enormous wealth transfer that will ensue.