One has to take note of the presence of the state and its addiction to taking by force. Then, one has to decide how to protect and preserve ones capital, and how to increase it through investment if investment is possible. Let us consider preservation first. Preservation has been made all the more difficult by the forced alteration of the value of the currency. There was a time when the recommendation from father to son could be, “Get a job, work hard, save.” Now, not only do banks pay almost nothing for holding ones savings, but the inflation rate inflamed by the choices of government to shower the citizenry with newly printed currency has resulted in an extraction in particular from savers.
Let us note that last point in its own paragraph: ANY who support the state support the right to target the self-restrained saver for punishment. Period. But it must be announced again, such a dark reality it is. ANY who support the state support the right to punish those who SACRIFICE, those who consume less than they produce, those who endure dissatisfaction and delay gratification. What are the results of such a policy dear reader? What is it predictable the state will incentivize, produce? Predictably it will produce fewer savers, less willingness to sacrifice, less willingness to delay gratification. I will not follow the implication farther so dark does the path become. There is NOTHING good down there.
This puritanical libertarian divides the little he is able to trade for his labor into immediate consumption and saving. Of immediate consumption there is much belt tightening, self-restraint, and effort to produce more than. What is consumed is significantly correlated to psychological state. The differences between want and need, can do without and can’t do without and they way in which choice, character, experience are intertwined in the content of these categories is worth much self-reflection. How much of life can you or I enjoy without spending? This puritanical libertarian dares himself and you to test.
Otherwise said, consumption MUST be less than production. Else, the edge of poverty and despair, nothing set aside for the future. The future is dark and includes the unplanned, the unpredictable. It is naturally productive of anxiety. Such a disequilibrium (between less-than consumption and more-than production) is to be achieved by a combination of self-restraint in consumption and self-extension in labor. “I can work more than I think and consume less than I think” says this puritanical libertarian to himself regularly.
Of savings there is short-term and long-term. Short-term savings is an extension of soon to be consumption related to maintenance of life for coming expected expenses. This includes a hodge-podge and changes over time. But it consists of a peering into the near future and establishing as goals the meeting of its needs. It is a kind of maintenance preparation of that which will predictably wear out when it is least expected. Clothes need to be replaced soon. The house will require maintenance soon. The transportation will require maintenance soon. There is likely to be a medical event requiring subsidy soon. And on to the less necessary but still socially relevant–there will be a vacation soon, there will be Christmas expenses soon. All of this requires cash given that cash is tradeable immediately for the maintenance. So, to the degree that this saving is in cash it is to be robbed by the state in the devaluation of currency. But to transfer it into other commodities is to make it less immediately available and susceptible to the fluctuations of the value of those commodities which are not immune to the actions of the state.
Of long-term savings, which can only be allocated to when immediate consumption and near-but-not-yet short term consumption has been met–and let us reiterate how much of this is determined by psychology, the presence of the one and his wants and demands–there is a reserve that is not to be employed in the next decade and is reserved for the older and weaker self who will need it. This portion of savings is available for investment. All is at risk. But not all has to be equally at risk.
This puritanical libertarian transfers a portion of this longterm capital accumulation into the immediately unspendable AND immediately untraceable of physical commodity in precious metals. This is the ultimate reduction in risk. I like the unspendability. And I like the detachment from the currently complex financial system. Were that system to falter, it would not. In addition, this puritanical libertarian thinks that he sees the bloated and addicted state turning more and more to fiat money printing as a way of satisfying itself and those it has promised loot. Those with capital stored in cash are MOST harmed by this debasement of the coinage.
To see what has already happened one only need go back to Roosevelt’s (the New Deal, WW2) Executive Order 6102 in which the hoarding (read saving) of gold was made illegal and the state threatened penalty of $10,000 to hoarders (that is $200,000 in 2020 dollars) and offered $20.67 per ounce in return for gold turned in to the state. Here comes the sign of growth. Gold, per ounce, is now trading at roughly $1800. (It is facts like these that have to be most attended to even though they are not a part of appearances and so have to be introduced by an agent who wants to understand more than he is presented with by the state. “From $21 to $1800 in under a century” over and over again. Put it on your mirror. Put it in your car. The same is happening to the fiat currency held by the state in your social security account, the same is happening in any 401k, the same is happening to savings accounts.) Gold has not changed. The value of dollars has. Anyone seeking to preserve capital TODAY must take note of what has been and is still happening today. The purchasing power of the currency has been reduced steadily and meaningfully.
A typical response? Well, the price of wages goes up also, so it all works out. Ha! No dear reader. What happens is that the new fiat that debases current fiat is introduced at a particular moment. It is the powerful who hold it first. They spend it while prices are still reduced. By the time the weaker members see the increase in wages the increases in prices have already been completed and the powerful have had the advantage. The powerful spend when prices are still cheaper. The weaker must spend when prices have been increased. IT IS A TRANSFER FROM THE WEAK TO THE STRONG. That is what the state does.
One can do much for the protection and preservation of long-term savings by first the self-restraint that is required to produce what is not necessary for immediate consumption. Then, one can do much by transferring such saved capital into a form that is more likely to preserve its value than fiat currency.
The act here is hardly one of investing. It is saving in its purest sense. It is preserving. One should preserve purity, virtue, good social relations, and finally capital. The state has made that a choice by introducing fiat currency debasement. It didn’t have to do this. But it could not expand its spending if it were simply limited to its savings like most little citizens are required to do. So, it turned to debasement. And we should note that the outcry from the citizenry was not as great as it could have been.
The state always harms the citizenry through an act that is cloaked in rhetoric of crisis, emergency, coming apocalypse. It knows that life is hard. It also knows that those not in the state are limited in their dealings to state permitted voluntary contract. It knows that is has greatly restricted such voluntary contracting by taking by force that which one could contract with and by regulating out of existence much of what could be contracted. These limitations increase insecurity, fear and challenge for the citizen. Primed as he is in fear and anxiety the state offers help. But it is not help. It is only an increase in the conditions that are stimulative of fear and anxiety and insecurity. Such was the twentieth century. Such is where are now early in the twenty-first.
Such is the first step in investing–the purposive act of preservation of capital in a system that seeks to debase the savings of those with the discipline and restraint to create it. It is the precursor to investing as an active choice made to preserve capital. Invest in your future. Save by preserving your capital.
Gold is by far the most stable and has the longest historical track record. It is also the commodity that is most cherished by central banks. This is a sign. For the poor man there is the poor man’s gold, silver. Silver has also a track record of use in coinage. Silver is used up because it has industrial as well as financial use. Gold is hardly used up at all. Its quantity is preserved and increased year over year.
I am hardly storing value in silver and gold in order to use them in some apocalyptic scene of production and trade. I am merely storing the depreciating dollars in another commodity which I bet will depreciate less. When it is time to consume with the stored value it will be predictably converted back into whatever currency is accepted by traders. If recent history is any indication, the gold per ounce move from $20.67 to $1800 means that holding the gold and converting it in a couple of decades will likely have stored value better than holding the dollars would have.