That's an investment in financial stability, with returns valued in peace of mind rather than dollars. I'm not rich enough or reckless enough to qualify for a bailout. So how do I protect myself?
That's fair.
If we can't even rely on a stable currency, what is the point of government? we might as well go back to bartering. In fact, this is what is happening. As people can't rely on money to hold it's value anymore, they're going back to hard assets like stocks, and real estate.
Inflation is at record lows. If anything, deflation is rearing its ugly head.
The reason e.g. rents are high is that there is high demand for housing in cities and zoning restricts new construction. That's not inflation.
Inflation is much closer to whats listed here for many americans. https://chapwoodindex.com/
If you think it's bad knowing that your dollar will devalue 2% every year, imagine trying to make plans not know whether it was going to drop or go up 7% next year--or anything in between.
Hard times aren't as safe as good times, all around.
Investors get paid to take risks. The less risk you want, the less you get paid, and there is a point at which you're taking so little risk that you get paid less than you lose to moths and rust. During hard times, the level of risk required to get a positive return is higher.
Alice, Bob and Carol come into the bank and each take out a $5000 loan. The bank credits each of their accounts with $5000, but there is still only $5000 in their vault, so now they have 25% reserves. As long as the reserve requirement is below 25%, this is fine. If the reserve requirement was 30%, they couldn't make that many loans.
With a 0% reserve requirement, they could loan your $5000 to a million different people and have 0.000001% reserves and still be allowed because 0.000001% is more than 0%. They could send you away and the bank manager could deposit a dollar and they could make unlimited loans from it. They have no use for your money.
I'd like to explain this to my elderly parents, who have cash sitting around in savings accounts and don't invest, but don't think trying to scare them with "moths and rust" is going to be very convincing.
What's a more convincing way to explain this?
Also, are money market accounts also going to be hit hard by negative interest rates, or would that be considered investing?
I don't think it'll touch strongly on saving your money being a bad idea, and I really don't remember anything about negative interest rates, but it does make investing seem much less scary.
You can’t punish people for saving on one hand and then charge them exorbitant rates or deny them loans altogether when they want to purchase a house without that down payment at hand.
If you're buying today as opposed to two weeks ago you might consider some silver, because its price has been driven sharply down relative to gold by the recent flight to cash.
There are other options. You can use banknotes; although a US$100 bill has lost >90% of its value relative to gold since the end of the gold standard, 15 hundred-dollar bills still weigh less than an ounce. As we saw a couple of years ago in India, though, the government can declare your savings illegal with the stroke of a pen ("demonetization"), and then nobody in other countries will accept them anymore; less drastically, they can just print more money, producing inflation and having the same effect as a negative interest rate.
Gold and banknotes have the disadvantage that they're easy for bad people to steal from you, whether those bad people are the police ("asset forfeiture") or just have poor impulse control. Alternatives that are harder to steal: Bitcoin (although on Thursday it lost 50% of its value); treasury bonds (although they'll also lose value with negative interest rates and inflation); real estate (although some friends of mine had their house bulldozed by the government last year while they were fighting in court to keep it).
Diversify. And try to live somewhere that thinks that financial stability is more important than fighting drug trafficking or pedophiles or computer criminals or whatever excuse they're giving this year to take money from the poor and give it to the rich.
If you were really intent on buying physical gold, I don't know why you would bother with this instead of just buying gold coins from the US Mint. I don't think you'd have to worry about getting counterfeit gold in that case.
But why own physical gold? Why not just trade in gold futures or buy gold mining shares?
Same with silver.
"if you're rich, open a Swiss bank account — no longer an option available to US citizens"
If you want the stability of the Swiss Franc, it can be traded on the foreign exchange market.
Heavy gold chains under your clothes are a lot safer when you're traveling than a bunch of coins. Moreover, the 1933 Executive Order confiscated the coins but not the chains.
> But why own physical gold? Why not just trade in gold futures or buy gold mining shares?
It's harder to confiscate, especially at scale.
> If you want the stability of the Swiss Franc, it can be traded on the foreign exchange market.
What does the franc have to do with anything? This is a non sequitur.
Of course coin collectors and anyone dealing in bullion will not treat the coins as equivalent, and historically speaking this is one of the reasons for stamping the year and mint mark on the coins, but this is entirely at the discretion of the mint; there's nothing stopping them from issuing new "gold" coins with a lower percentage of gold and the same year mark, except for the same kind of social pressures that prevent the government from simply expropriating the contents of your bank account (as they did here in Argentina in 2001) or refusing to pay its bonds (as is happening here in Argentina right now.)
You might object that the United States isn't Argentina. But until just before 2001 Argentina wasn't Argentina either, not as we know it today; its troubles were behind it and it was the model country the IMF would show off to demonstrate how effective its economic recovery plans could be, even as the economy was gradually hollowed out. People living in the US, a country whose stock market just fell by 30% in a month and which didn't manage to produce or allow the importation of a reasonable number of COVID-19 tests until this weekend (although Korea, Japan, Germany, Taiwan, and China had no trouble with this) may find this sounds familiar.
If someone is concerned about the banking system expropriating their savings, it is not a reasonable response to offer them an alternative that makes it easy for banks, stockbrokers, or the government to expropriate their savings. That's precisely the kind of threat they want to defend against.
There is a massive deflationary force acting on the economy. Anyone bringing up inflation fears, except to dismiss them, is not tracking any known factual reality.
Pretty sure this will get downvoted, but just 5% Bitcoin + 95% cash has historically beaten equities with less risk.