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As long as you can own gold, you can put yourself on your own gold standard by 
converting paper money to gold. I recommend you do that to some extent. Not all in, but I recommend having 10% of your investable assets in gold for the conservative investor, and maybe 20% for the aggressive investor — no more than that. [Let me explain.]
So writes James Rickards (http://dailyreckoning.com) in edited excerpts from his original article* entitled Your Personal Gold Standard.
[The following article is presented by Lorimer Wilson, editor of www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Rickards goes on to say in further edited (and in some instances paraphrased) excerpts:
If you think that the value of paper money will be in some jeopardy, or confidence in paper money may be lost, one way to protect yourself is by buying gold, and there’s nothing stopping you. The typical rejoinder often is, “What’s the point of owning gold? They’re just going to confiscate it, like Roosevelt did in 1933?” but I find that extremely unlikely.
In 1933 we’d just come through four years of the Great Depression and Roosevelt was new in office…He closed the banks right after he was sworn in and used them as intermediaries to confiscate the gold of a small number of people who had 400-ounce bars in bank vaults. Now, [however, the ownership of gold is] far more dispersed, and there’s far less trust in government. If the government tried to confiscate gold today, there would be various forms of resistance. The government knows this so they wouldn’t issue…[such an] order, because they know it couldn’t be enforced, and it might cause various kinds of civil disobedience or pushback, etc.
As long as you can own gold, you can put yourself on your own gold standard by converting paper money to gold. I recommend you do that to some extent. Not all in, but I recommend having 10% of your investable assets in gold for the conservative investor, and maybe 20% for the aggressive investor — no more than that.
The above numbers are pretty high allocations relative to what people have. Most people own no gold, and all the institutions combined have an allocation to gold of about 1.5%, so even if you take the low end of this range, you’re still nowhere near 10%. In fact, institutions could not double their gold allocation even to 3%. There’s not enough gold in the world — at current prices — to satisfy that demand so it’s got this huge upside associated with it.
Central banks [say they] don’t want to go to a gold standard but if gold is [such] a barbarous relic, if gold has no role in the monetary system, if gold is a “stupid” investment, then why do the Chinese have 5,000 tonnes? Are they stupid? [I think not!]
If some scenarios play out, you are going to see the price of gold go up… a lot and it may go up a lot in a very short period of time. It’s not going to go up 10% per year for seven years and the price doubles. It’s going to chug along sideways, maybe in an upward trend, with a lot of volatility. It will have a kind of a slow grind upward… and then a spike… and then another spike… and then a super-spike. The whole thing could happen in a matter of 90 days — six months at the most.
When that happens, you’re going to have two Americas. You’re going to have an America that [was prepared and an America that] was not prepared. [The former will have some protection from owning some gold bullion while the latter will see their]:
- paper savings wiped out;
- 401(k)s devalued and
- pensions, insurance and annuities devalued
through inflation.
Remember, it’s not just the price of gold going up. It’s like putting a thermometer in a patient, getting a 104-degree temperature and blaming the thermometer. The thermometer’s not to blame; it’s just telling you what’s going on. Likewise, the price of gold is not an economic object or aim in itself; it’s a price signal. It tells you what’s going on in the economy.
Gold at the levels I’m talking about would mean that you’ve now verged into hyperinflation, or something close to it, because nothing happens in isolation. At that point, you have to give more credence to gold. Now you’ve crossed the threshold.
The minute you think of gold and paper money side by side, or having some relationship, you get to these price levels of $7,000-8,000 an ounce. They’re not made up. They’re not there to be provocative. They’re actually the math. Those are the numbers you get when you simply divide the money supply by the amount of gold in the market.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://wallstreetpit.com/100623-your-personal-gold-standard/ (Copyright © 2013 Wall Street Pit)
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Let us compare insurance to PM’s.
You purchase insurance because if something unexpected happens, you don’t want to pay the entire bill for it yourself. Yes, until that something happens you are paying for your insurance (you do not make any money from the money invested in PM’s while you hold it), but that amount is small compared to what you might lose should disaster strike (consider a dramatic loss in value of flat money) which would then require you to accept a huge reduction in the value of your net worth ( loss to your portfolio because you have no gains in the value of your PM’s to offset the loses to your flat money.
What percentage of your income do you spend yearly to “own” Insurance?
Perhaps the same percentage should be used for your PM holdings in your portfolio!
Because how many readers consider having no insurance as prudent?