What Real Money Means

article-money-wendell-brock-silver-pieces-adjby Wendell Brock

Precious metals such as gold and silver have been used as a medium of exchange since the earliest civilizations. In our constitution, the American people gave the federal government the responsibility to oversee and maintain our monetary system, using gold and silver as currency. Originally, this “gold standard” made it easy to trade nationally and between countries.

Paper money became a symbolic proxy for the precious metals; lighter and easier to carry, each note represented a portion of the gold and silver held in the U.S. Treasury. Dollar notes were essentially a promissory note that could be exchanged at any time for the equivalent “real” money, called specie.

Over time, the government printed more notes than there was gold in the vault. Thus, paper money has no “real” value, except that which others think it’s worth. History shows us instances where a government prints different, new money for political reasons, rendering the old currency worthless. That’s one reason some people believe in holding precious metals (gold and silver) rather than paper money or digital accounts.

Having gold or silver on hand can give us extra financial security because the value of these assets tends to keep up with inflation and many businesses will accept gold or silver as payment for goods or services. That means we could use a one-ounce silver coin worth $20 in lieu of a $20 bill.

Overall, the value of gold and silver remain fairly constant, while dollars are affected by inflation. For example, a custom-made wool suit in the early 1900s cost about $20. Today the cost in dollars of that suit has inflated to about $1,250. In the early 1900s, an ounce of gold was worth $20 and today its value is about $1,250. We need more dollars to buy the suit today, but then or now,
it’s still valued at about one ounce of gold.

Investing in gold and silver is simple; first, find a knowledgeable broker. All brokers charge the “spot price” (going rate) plus a premium for their service and any fees charged by the mint for minting and certifying that we are getting true quality metals. Shop around, some brokers are big companies with high overhead and marketing campaigns, while others with small companies and low overhead can secure the same gold/ silver at lower cost. Metals are also sold based on a quantity scale, meaning the more we buy, the lower the brokerage fee will be, thus giving a lower overall cost per ounce.

Holding metals as a medium of exchange can be a great asset and financial insurance strategy; as an investment, traditional financial planning wisdom recommends that approximately 5 percent of assets should be in precious metals.

Having “real” money can also bring peace of mind from knowing we have something that has never been worth nothing. Holding a newly minted piece of pure gold or silver is kind of fun and exciting, too. The metals are beautiful to look at. Silver rounds are fairly inexpensive, which can make them great giveaways, gifts to employees, family members or even children. They benefit even more if we include a lesson on dollars versus precious metals and how money works.

crg_wwbrock-cropped-adjMcKinney financial consultant Wendell Brock, MBA, ChFC, provides comprehensive financial planning, debt relief plans, retirement, estate planning services and precious metals brokerage services. For more information, call 214-937-9905.

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