Book Summary: Guide to Investing in Gold and Silver – Written by Michael Maloney
This is a great educational book on real money. Mike reviews the solid principles of money that have endured throughout human history. One thing is consistent and that is that gold and silver are real money. In today’s world of fiat currencies, gold and silver are tools you can use to preserve and protect your wealth. Mike reviews the differences between currencies, real money, and fiat money. Fiat currency is basically paper money that is not backed by anything. We will go into some detail on why this is dangerous and the average investor should at least understand the importance of debased money and inflated fiat currencies. With the economic collapse of 2008 along with Ireland, Greece and other bankrupt countries, we as small investors must be educated in order to protect ourselves.
Why is this important to me?
This is important because the largest transfer of wealth is occurring right now, and that transfer is moving away from the United States and not toward us. This must be a priority if you want to protect yourself and your family.
Various things are happening, but 90% of the general public don’t really understand it. This is understandable because the noise between political talk on CNN and Fox News deflects the real issues. The real problem is this: The Federal Reserve is a private institution that is neither regulated nor audited. They control the financial system. These guys are quintessential king-makers who run the country in the background. It is true that Thomas Jefferson was against a central bank in the United States. For more information on this topic, you can listen to Ron Paul. He’s the congressman from Texas who’s in on all of this.
The big changes we’ve seen from the internet boom to the housing crash have been a direct result of the Fed. Not many people know this and some will complain that this is wrong. The Fed has kept interest rates artificially low, sparking the bloated housing market. Relaxed debt to equity capital and financial instruments of mass destruction known as CDO and MBS and other weapons nearly killed the country. Financial education is necessary for us, the little ones, to have a chance. Read this book to open your eyes. One thing that is not said in the mainstream media and that is more powerful than terrorism is this: if the dollar is lost as a world reserve currency, our total standard of living will be reduced by a minimum of 25%. Right now it is already difficult for 85% of American families. Another wealth transfer could put the final nail in the coffin. Inform yourself.
There is a ton of information in Mike’s book. The history of currency degradation is described in all major empires, including Persian, Greek, Roman, British, and now American. Currency degradation, inflation, and taxes are wealth thieves. If your money is a candle, taxes and inflation are the flames that burn at both ends.
1. Wit – I am not a pessimistic person. I believe in the strength and determination of the American people. This still doesn’t get in the way of the fact that we all need to be educated and the only way to change is from the bottom up. There is no way that a top-down government can benefit the country in this way. It is the ingenuity of the iron horse of the American people that will solve our financial problems.
2. Gold and Silver: Gold has been money for over 5,000 years. His redheaded stepsister Silver has also been known as Money. The relationship between the two has historically been 16-1. Personally, I have seen the spread in the last year go from 80 to 1 to 30 to 1 and back up to around 40 to 1. What this means is that you can buy 40 ounces of silver for 1 ounce of gold. Therefore, silver is $ 35 for one time and gold is $ 1,500 per ounce. Now, reality check. Warren Buffett does not invest in gold. If you’ve been following any of my book summaries, then you know I’m a Buffett fan, so let’s check this out. Basically, Buffett says that if you had all the gold in the world, then you would have a 67 foot gold cube (tall, wide, long for beginners in math). I could polish it up, kiss it and sleep on it. Instead of the bucket of gold, you could have half the farmland in the United States plus 7 Exxon Mobiles plus a trillion dollars in cash. I’d rather take the latter as I would. Basically, Buffett is arguing that gold IS NO UTILITY. I agree with him. Silver in hand is different. Buffett has had money in the past and he may still own some. Silver is useful because it is used in cell phones, computers, smart devices, and medical devices. That is why I love silver as a means of saving.
3. Cash flow vs. Capital Gains – We don’t want to fall for the big fool theory and invest in capital gains. Well, in a truly contradictory way, Silver is a capital gains investment. Regardless, you must analyze all your investments in a synergistic approach. This means that we want investments to generate cash flow, but we also want our savings to increase. Robert Kiyosaki claims that savers are losers. Translated, this means that if you hold onto the dollars, then you are losing out due to inflation and currency debasement. Therefore, you can keep your savings in silver.
Now let’s talk about owning “real money” as a lifeline for wealth. Note: Educate yourself, I’m not saying go out and invest in silver and gold today. I’m saying educate yourself. I personally invest in silver and will continue to do so, but it is very volatile so you need to be informed. Also, I am not a financial planner and I do not give advice, so do your own homework. My goal is simply to help you with that task.
1. Mountain of Debt: This book was written in 2007 BEFORE the subprime mortgage collapse. Even then, the United States was buried in a mountain of debt. Since then, the Fed has tripled the money supply. Therefore, that Mountain has just become Mount Everest. This happened in the last 3 years and that is why the dollar is at an all-time low in 2011.
2. Unfunded Liabilities – Social Security, Medicare, Medicaid ……… These unfunded liabilities coupled with the mountain of debt simply magnify the problem. When you give someone something and then try to take it from them, all hell breaks loose. Take a look at GM. They had to declare bankruptcy, obtain a government bailout, and forgo all their unfunded liabilities in order to survive. They are doing quite well now, but the little boy lost his pensions and medical care. Educate my friends. Don’t let other people manage your money … The same will happen in the United States with unfunded liabilities. Start planning NOW.
3. Derivatives – We’ve talked about this before, but simply put, this is what happened in the subprime collapse. Around 100 people sat in the rooms and decided to sell MBS (mortgage-backed securities) to investors. The problem was that they wrapped trash, sprayed it with perfume, and sold it as triple-A rated instruments. The rating agencies and the leaders of these companies must be prosecuted. What happened was that a 1-2% move in stocks could kill companies because the leverage was so deep. These guys were tapping billions to make tens of millions. There are too many zeros for that to work in the long run. As we now know, it was not.
In short, what does all this mean? This book and others like it will help you take control of your own destiny. It is recommended that you keep 10% of your assets outside the financial system. This means that there is no counterparty risk. When you put all your money in the bank and there is a run on the bank and it fails, the bank is the counterpart. Having physical gold and silver as real money eliminates counterparty risk.
I hope this short summary has been helpful to you. The key to any new idea is to incorporate it into your daily routine until it becomes a habit. Habits are formed in just 21 days.
One thing you can get out of this book is GET EDUCATED. Please open your eyes and spend a few minutes a day educating yourself. You’ll be happy you did.