You’re going to fall asleep and not wake up for 10 years. Something like in the style of sleeping beauty. However with one difference. You know it’s going to happen at some point in the not too distant future. You just don’t know exactly when.
Now. Here’s a question to ponder.
If you know you’re not going to wake up for 10 years, how would you choose to preserve your savings?
While this sounds a lot like a fairy tale, today we face a not completely dissimilar situation.
The World’s Monetary System is Changing
The world’s monetary system is dying – or at the very least changing profoundly. So it’s worth pondering how you will negotiate this shift.
So what’s changing?
For a start, negative interest rates are spreading. In fact US$17 trillion or one third of the total worldwide tradeable government bonds now pay less than zero percent interest.
Or put another way, perversely, investors are paying to lend the borrower money!
This is completely bonkers! It’s not ideal for banks either. Because banks make money on the difference between what they can take off borrowers and how much they have to pay lenders. (Of course it helps they can conjure money out of thin air too!)
Currently the borrowers are costing money as interest rates are so low. While in most places the lenders haven’t quite started to “pay to save” money – yet.
But that is likely coming to a bank near you. In Denmark, Jyske Bank has a mortgage which pays the borrower 0.5% per year!
Why Negative Interest Rates?
The world’s central banks are implementing negative interest rates in the hope it will force people to spend money and keep the current debt based money system going. Debt must continually grow for the system to function.
Technology and Money
On the flip side, there is a lot of new technology and advancement happening in the world of money and finance. It doesn’t have to be doom and gloom. We’ve seen the birth of Bitcoin and the rise of cryptocurrencies in recent years.
Like many other areas of life it seems decentralisation is coming to money as well. In the long run that’s a good thing. Let people decide what they want to use as money.
Perhaps we will no longer have various national currencies?
US Dollar’s Reserve Currency Status in Danger
The average length of the previous 5 reserve currencies is 94 years.
The US dollar has been the global reserve currency for 99 years. So it’s getting fairly long in the tooth. What will replace it?
When Sleeping Beauty Wakes Up, What Will Money Look Like?
The difficulty is, much like our “sleeping beauty” mentioned earlier, we simply don’t know how all this will play out.
- What will the monetary system look like in 5 or 10 years?
- Will today’s banks still exist?
- What impact will the previous money printing have on the value of today’s currencies?
- Will negative interest rates cause a spending frenzy? Will we see high inflation as a result?
Look to the Past to Prepare for the Future
Here’s a novel idea. Consider looking to the past to prepare for the future.
It is said that an ounce of gold bought a fine toga and pair of sandals in ancient Rome. Today, an ounce of gold still buys a quality mens suit and shoes. Whereas the US Dollar has lost over 94% of its value since 1913.
Today Central Banks, such as those of Russia and China, are buying gold hand over fist to add to their national reserves. China has added about 100 tons of gold to its reserves since December. Russia has bought 106 tons of the precious metal this year. What are they preparing for?
How to Transfer Your Wealth into an Unknown Future
Wealth can be thought of as an accumulation of knowledge. Gold is a stable means to safely transfer that wealth into the future.
Bitcoin and cryptocurrencies may well play a part in the future monetary system. But it’s very difficult to predict which one, if any, will win out over the others. Plus they are so far untested in a global crisis.
Whereas gold and silver have stood the test of time. They have been used as money and retained their value for millenia.
Gold and Silver are “Financial Insurance”
Think of physical gold and silver as your financial “insurance policy”. Gold and silver are the only financial assets that have no counterparty risk. This simply means you are not relying upon another party to remain solvent for your asset to maintain its value.
So store a portion of your wealth in physical gold and silver. A rule of thumb is 5-10% of your liquid assets (that is excluding property/real estate) in gold is recommended. Read more about how much gold you should hold in your portfolio.
Then you are free to continue to invest and speculate with your remaining savings. Whether that be stocks, bonds or taking a punt on a few cryptocurrencies. Or even investing in a promising start up.
That way when you “wake up” in 5 or 10 years time, regardless of how things change, you can rest easy that your wealth in gold and silver will hold its purchasing power.
Then you can transfer your stored wealth into whatever is being used as money at that time. Or “spend” your gold and silver on whatever the most undervalued assets are at that time.
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