Protecting Your Cash Value in Uncertain Economic Times

Are you feeling uncertain about our country’s economic future?  If so, you are not alone.  Most Americans feel insecure, especially because of massive governmental spending, bailouts, cash infusions and running up of debt.  Events are moving quickly, and the possible changes are so great that most Americans are taking a “wait and see” approach.

The result?  The current savings rate of about 6% is higher than any other time in our history.  Nationwide, Americans have amassed over $8 Trillion and growing in cash accounts.   And people are buying more gold, silver and rare coins.   If I am right, that buying will continue and intensify.

And no wonder.  The Federal Reserve is printing massive amounts of money (over $10 trillion in the last year by some estimates), and pumping it into the money supply through the ailing banking system.   Massive governmental borrowing, record Federal Government Debt (around $12 Trillion) and annual deficits approaching $2 Trillion do nothing to ease the anxiety. 

Since precious metals and rare coins hold value with the dollar dropping, this partly explains the continuing and growing demand for these hard assets.

We are just beginning to grasp the almost incomprehensible scope of the credit default swap crisis, which is lurking beneath the real estate securities debacle.  Well known economist Hernando de Soto (in an op-ed in the LA Times April 12) quotes the Securities and Exchange Commission estimate that derivative paper is worth $596 Trillion, but the Bank for Int’l settlements in Basel Switzerland estimates could be as high as $1.2 quadrillion!!

This might not cause a global meltdown, but at the very least, these conditions make all but certain the value of the dollar will drop at least 50% and possibly 70% or more of its value in the next 5-10 years.  If this happens – which seems very likely – $100,000 in cash will drop to a value between $30,000-$50,000 (in today’s dollars). 

That is a loss potentially greater than the drop in the stock market in the last year.

The famous 19th century Utopian novel “Candide” by Voltaire ends with the famous answer to the question, and I paraphrase: “What did you learn about utopia?” with the following:  (quoted exactly) “Cultivate your own garden.”

Sage advice in these uncertain times.

So what are you doing to protect yourself?

Should you buy gold? Silver? Rare Coins? How much of your investment portfolio should go into hard assets? Can you do anything with your IRA?  Or with your 401K?

For answers to that question, stay turned to this weekly blog.  Tell your friends.  I’ll be sharing current information through the eyes of my nearly thirty years experience as a professional rare coins and bullion dealer.   Your questions and comments are welcomed.  Please write [email protected] 

featured Coins This Week:

1907 High Relief St. Gaudens MS-60 Obv


Peace Dollar Obverse

Comments

[Patricia]

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Patricia

http://forextradin-g.net

[Lawrence]

I'm delighted you are enjoying the blog Patricia, and I very much appreciate your feedback.