Judge Napolitano Quote: Congress and the Federal Reserve have been printing away your purchasing power since 1913. Owning gold puts power back in your hands.
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Why Consider
Investing in Gold?

The big picture for gold is very compelling. As inflation heats up, dollars buy less and less. Yet gold and silver, over time, have historically maintained their value.

The aftermath of COVID-19 is still being felt in the financial world. Stacked on top of runaway debt is a geo-political landscape that is re-aligning into concerning alliances that could ignite, or reignite, at any moment. Meanwhile, central banks around the world continue to stockpile gold. What do they know?

Precious metals are tangible, unprintable and rare. As finite resources, they have inherent value and are trusted by banks and billionaires as a store of wealth. Here are a few compelling reasons why many experts recommend diversifying 5-20% of your portfolio into gold. 

8 Reasons ...

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A CLOSER LOOK from LEAR CAPITAL
Unsustainable Debt

In 2016, the Fed began to normalize its monetary policy by raising interest rates and reducing the size of its balance sheet to more historically normal levels. By doing so, the Fed was reversing the emergency measures put in place after the 2008 financial crisis. These money printing efforts known as “Quantitative Easing” created trillions of dollars out of thin air. But then, in Q4 of 2018, the S&P 500 fell nearly 20%. It was the worst December in stock market history since the Great Depression. That spooked the Fed into its most startling change in monetary policy in recent history. Instead of normalizing monetary policy as it had repeatedly said it would do, the Fed reversed course. Interest rates were lowered once again, and the printing presses started churning. 

Now that the pandemic is behind us, the Federal Reserve is trying to tame inflation, which is a direct consequence of money printing, by raising interest rates. Nevermind that we have hit the accepted definition of recession — two consecutive quarters of negative growth — and it is not considered advisable to raise rates in a recession. They have simply re-defined recession. The U.S. Debt Clock, as of April, 2023, has our total national debt at over $31.7 trillion and counting. That amounts to about $247,000 per taxpayer and over 120% of GDP. How long can we keep borrowing? As long as there are buyers out there for our debt. There will be buyers for our debt as long as there is faith and trust in the stability of the U.S. government and our economy. Is that starting to crumble?

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01

Unsustainable Debt

The last four years saw the biggest debt spikes in U.S. history, mostly driven by pandemic-related spending, and more recently, by aid packages to Ukraine. Our rapid spike in debt started with the 2008 financial crisis and never slowed down. Why can’t the Fed fix this? They tried.
Read More

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Current U.S. Debt
$0
$247,000
per Taxpaying Citizen
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02

A Whole Flock Of Black Swans

The global economy in lockdown over COVID-19 has been, and will prove to be, the blackest of Black Swan events in our lifetimes. Followed up with oil shocks and the Russian-Ukrainian war, it’s no wonder the markets have had wild gyrations since 2020. Read More

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It is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility.
Nassim Taleb
The Black Swan
Nassim Taleb
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A Whole Flock Of Black Swans: Accelerated Spending

Nassim Taleb first coined the term in his 2007 book The Black Swan, and it fits the coronavirus crisis and resulting lockdowns perfectly: “First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme ‘impact.’ Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.”  

Experts have been saying for years that the markets were overvalued. The fundamentals did not support the price levels the markets had been seeing. The advent of the “unicorn” company was as pessimistic a signal today as the subprime mortgage was in 2007. Now the unicorns are beginning to go bust and the fallout has started.  

Rippling supply chain disruptions and protectionist roadblocks are threatening global trade. Some of these roadblocks are out in the open, others are more clandestine like the sabotage of the Nord Stream Pipeline. As travel opens back up and people begin commuting to work again, energy demand is ramping back up and so is inflation. 

The great news is that precious metals markets are a relatively stable haven in this storm. Gold began 2022 at $1,825 per ounce and ended at about the same. Silver also began the year at around $23 an ounce and ended at around $24. There were some fluctuations in that year, but that is why precious metals are not for day traders.

Over the long term, while stocks were sinking and inflation was raging, gold held steady, year over year. Prices for gold and silver are still affordable given these assets have a fixed supply and have all the intrinsic qualities that make them an ideal money and investment. 

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A CLOSER LOOK from LEAR CAPITAL
The Dollar on the Precipice

The COVID-19 global pandemic and the sanctions put on Russia due to the invasion of Ukraine has led to the dollar losing its global position. Washington’s attempts at papering over the pandemic lockdowns and loss of productivity have only accelerated the pain. 

Nixon brokered the deal with the Saudis establishing the dollar as the exclusive currency of oil markets. Since then, we’ve been able to export our inflation to the oil consumers of the world. That arrangement has been unravelling at the seams. Other nations, specifically the BRICS nations (Brazil, Russia, India, China and South Africa) resent being held hostage to U.S. foreign policy demands and sanctions. Politicians in the rest of the world would kill for the blank checks U.S. politicians get as a result of the petrodollar and they may be closer to getting them. China has been building up the petro-yuan since 2017 and it has been making huge gains since 2022.   

They are actively ramping up efforts to de-dollarize the global energy sector and working with the Saudis to do it. As more regimes buck under the restrictions of U.S. sanctions and dollar privilege, this will only increase.  

Combine all that with the massive spending bills Washington keeps passing, and the quantitative easing the Fed keeps pumping out, and it’s a perfect storm for a global psychological debt limit for the dollar.

Don’t be fooled by the term “stimulus.” Those newly-printed dollars have kept liquidity in the system to mitigate short-term damage and stop the bleeding. Given these recent economic changes, the probability for a new global currency to replace the dollar is greater than ever. 

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03

The Dollar On
the Precipice

The dollar has been the most critical reserve currency in the financial world for decades, largely due to the fact that OPEC oil contracts have been settled exclusively in U.S. currency. That arrangement has been under immense pressure in the last couple of decades and is currently undergoing seismic shifts. Read More

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It is classic that coming out of an extended period of very low real interest rates and abundant credit, there is an enormous amount of leveraged long holding of assets that are going down.
Ray Dalio
Billionaire and Hedge Fund Manager 
Crumpled Dollar Bill
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04

China's Pursuit
of Dominance

China’s aspirations to grow in prominence on the world stage have long been known. The overarching goals for dominance economically, politically and militarily is simply too important to ignore. Read More

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The ultimate ambition of China’s rulers isn’t to trade with the United States,
it is to raid the United States
BILL BARR
Former U.S. Attorney General
Currency close up with economic line chart overlay
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A CLOSER LOOK from LEAR CAPITAL
China's Pursuit of Dominance

In a speech given in July 2020, then Secretary of State Mike Pompeo discussed several ways China is infiltrating U.S. and global economic systems.

At first, sending Chinese scientists and engineers to work in American companies and schools seemed friendly, like a move towards openness and cooperation. But a more sinister motive has become apparent. U.S. intellectual property has been stolen, costing millions of jobs. Supply chains have been disrupted as China’s strengthening military has made international waterways more dangerous for trade. American corporations have begun self-censoring messaging so as to not offend the Chinese Communist Party (CPP). And more and more, the U.S. has outsourced manufacturing and critical supply chains to China. 

China has been purchasing U.S. property and companies for decades in a Johnny Cash-style takeover — One Piece at a Time. Consider that China now owns or controls: 

  • 70% of acetaminophen used in the U.S.
  • 80% of the globe’s heparin, an important anticoagulant and an even higher percentage of antibiotics. 
  • A controlling majority in nearly 2,400 U.S. companies including AMC Entertainment, G.E. Appliances, IBM–P.C. Division, Motorola Mobility, and Smithfield Foods.
  • More U.S. residential investment real estate than any other foreign country.
  • 352,000 acres of American farmland, including a 130,000 tract in Texas near Fort Hood.

Let’s talk about the tract of land in Texas for a moment. This 130,000 acre tract is near the Mexican border and near 3 strategic military bases — Fort Hood, Fort Bliss, and Laughlin Air Force Base. The proposed use is for a wind farm, but that seems unlikely to ever turn a profit. Could they have other motivations? 

China continues its efforts in trying to dethrone the dollar as the world’s reserve currency.  In 2016, the Chinese yuan was accepted into the IMF’s basket of world reserve currencies. And China has wasted no time in creating a Chinese bond backed by the IMF basket of reserve currencies known as Special Drawing Rights (SDR). The Chinese renminbi is now the 5th most held reserve currency in the world. It’s also very interesting that China encourages its citizens to accumulate gold and doesn’t allow gold to leave the country. What do they see in this shiny metal?

Finally, Chinese officials have also instructed China’s financial institutions to sell U.S. Treasuries held in reserve and replace them with the new SDR-backed Chinese bond. Yes, Xi Jinping has dreams of world dominance, and this will have economic, political and military consequences. Any one of these areas could set in motion financial repercussions that impact one’s savings and retirement. The good news about gold is the protection it can provide when world tensions heat up. 

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A CLOSER LOOK from LEAR CAPITAL
Central Banks Hoarding Gold

As global tensions heat up, Russian and Chinese central banks are shedding their U.S. Treasuries and converting the proceeds into gold as a safe haven. It is economically strategic in the event of sanctions from the U.S., and therefore, isolation from the majority of global trade. 

Gold reserves also allow central banks to diversify out of an overdependence on U.S. dollar-denominated assets like stocks and bonds. This is a major concern for China especially. China now owns less than a trillion dollars of U.S. Treasuries, notes and bills for the first time in decades. They are accumulating gold in its place. Other countries are following suit: Germany has repatriated their foreign-held gold reserves, and countries like South Korea, Taiwan, Singapore and the Netherlands have all started acquiring gold.   

Isabell Strauss-Kahn, former Lead Financial Officer for the World Bank, summarized the role gold plays for central banks: “All these uncertainties accentuate negative market sentiment and drive central bank investors to reallocate their portfolios away from risky assets to safe-haven assets. This is where gold comes into its own, as it fulfills central banks’ three core objectives: safety, liquidity and return. Gold has been known for centuries to be a safe-haven asset. It carries no credit risk, has little or no correlation with other assets and the price generally increases in times of stress. As such, it offers valuable protection in times of crisis.” 

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05

Central Banks Are Buying Gold

In 2022, central banks purchased amounts of gold not seen since 1950. Why gold? Why now? Read More

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Graph showing central banks gold purchases
Central bank purchases for 2022 were at 1,136 tons — the highest level of net purchases on record since 1950, including the year Nixon ended the covertability of the U.S. dollar to gold.
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06

Generational Shifts

A lot has been said about the differences between the Baby Boomer generation and Millennials. Whether it is changes in the economic landscape, work ethic, or cultural preferences, there are differences that challenge our nation’s retirement structure. Read More

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Millennials have long been more likely
than older adults to support an
expanded government social safety net
and to rate economic inequality
as a major problem in the US.
CARROLL DOHERTY
Director of Political Research at the Pew Research Center
Illustration of arms and hands protesting
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Generational Shifts & the Changing Labor Force

Social Security was always an elaborate, mandated program — relying on the inputs of many workers to support a few retirees at a time. At first, 100 workers supported 3 retirees. Today 100 workers support about 25 retirees and it is only going up due to falling birth rates. The math no longer works. Pension funds are in even bigger trouble. State pensions were, on average, only 66% funded, with the worst off at 36% funded — before the pandemic. 2022 saw them hit with major losses.   

Millennials are the most educated, and yet the least employed generation. This generation is saddled with crippling amounts of debt (both personal and student loan) and escalating health care costs which prevent them from saving for their own retirements, let alone the previous generations’ retirements. And yet, we are relying on younger generations to continue maintaining the financial support our retirement system requires. And they just got very generous entitlement payments NOT to work during the pandemic. Now it seems very difficult to find anyone willing to work. 

The security of your retirement should not rely solely on promises made in 1935, that Millennials and Generation Y are supposed to keep. Nonetheless, many retirees do rely on the promise of Social Security, and the dynamic this is creating economically is going to be destabilizing.  

The number of aging persons relying on the social safety net, paired with the growing acceptance of entitlements, will almost inevitably result in higher taxes — meaning you will have less in your pocket each month. More money printing will likely be the response to compensate for these commitment shortfalls, resulting in the further devaluation of the dollar. Gold is a great inflation fighter and worth considering for wealth preservation.

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A CLOSER LOOK from LEAR CAPITAL
Can the World Sustain This Much Debt?

The reality is that debt is sustainable as long as the lenders and borrowers allow it. It is sustainable as long as the debt holders don’t call in their loans all at once. It is sustainable as long as account holders don’t demand all their deposits on the same day. Ah, but every depositor and every debt holder demands some of their deposits and debt on a daily basis. What happens when even THAT fraction of the fractional reserves vanishes? 

You may not need to liquidate your bank account tomorrow. However, you probably have confidence that if you needed $300 in cash at the ATM it would be there for you. If you needed $10,000, it would trigger a reporting requirement, but it would be there. But if you needed significantly more, at what point would the bank struggle to come up with it? At what amount would they need five business days to process your withdrawal request, and what does that mean? Should the monetary system become more and more unstable, look for those benchmarks to come down.  

It has been said many times, possession is 9/10ths of the law. Are you in possession of your money or does the bank control it? You would be a typical American if you answered “The bank, of course” or your brokerage, or IRA custodian or whoever. But should they really be in possession of 100% of it? How much cash do you have on hand? $100 in your wallet? How far would that take you if the banks closed for a while? Is it farfetched to imagine that could happen? What would you do if the ATM withdrawal limit was lowered to $20 a day, or electronic transaction amounts were limited, in effect freezing accounts? 

Enough with the speculation. Here are some FACTS:  Global debt has reached nearly $300 trillion. That’s a “T.” Gross World Product (GWP) is around $80 trillion according to the latest figures. Only about $5 trillion of that actually exists. Keep these facts in mind the next time you hear about negative interest rates — where the bank not only doesn’t have your money, they have to charge you to come up with it at a later date. The fact that banks in Europe and Japan have already been doing this should concern you. And if it comes to America, you should see it as an important signal and prepare accordingly. 

Gold is the oldest currency known to man. Going back to Biblical years, it has always been globally accepted and recognized. It operates beyond all borders and apart from institutions and governments alike, thus making it one of the most recognized stores of value known to man for centuries. 

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07

Faulty Financial Systems

You’ve heard it said many times. The debt is not sustainable. We’re witnessing it now — over the course of the pandemic, the U.S. passed trillions in stimulus, and then handed Ukraine a blank checkbook for their border dispute with Russia. Where is this money coming from? And what about debt around the world? Read More
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Global debt has reached nearly $300 trillion.
Gross World Product (GWP) is around $80 trillion according to the latest figures.
Only about $5 trillion of that actually exists.
Stacks of currency in a partially open safe
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08

The End Of Cash & Central Bank Digital Currencies (CBDC)

Long anticipated, the cashless society is upon us. Today, as you will see, cash is being totally replaced by numbers, all of which are associated with your name. Financial Privacy is no longer a sacred right.  Read More

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Will Your Privacy Disappear When Cash Disappears?
In 23 years, GDP has almost tripled, while the supply of cash has been cut by 76%.
Year Cash GDP
2000 $3.55 billion $9.4 trillion
2023 $840 million $26 trillion
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The End Of Cash & Central Bank Digital Currencies (CBDC)

Remember when the checkout clerk would ask, “will that be cash or check today?” Those were the options. In 1958 Bank of America launched its first credit card. However, it wasn’t until 1966 when the technology was licensed to other financial institutions. By 1985, the first Discover Card purchase was made for $26.77 at a Sears Store in Atlanta. Then, the race was on. The checkout clerk, instead of asking “will that be cash or check?” started asking, “will that be cash or credit”?

That was a quantum leap toward a cashless society. We see evidence that the transition from cash to credit is real. According to USDebtclock.org, since year 2000, the supply of cash in our money system has dropped 76% from $3.55 billion to just $840 million today. That’s barely enough for every person in the U.S. to have just $2.50 in their pocket. That means if you have $25 in your pocket right now, nine other people have zero. 

Here are three important facts:

  • In year 2000, $3.55 billion of cash supported a total GDP of $9.4 trillion dollars.
  •     
  • Now just $840 million of cash supports our $26 trillion dollar GDP.
  •       
  • In 23 years, GDP has almost tripled, while the supply of cash has been cut by 76%.
  •       

Enter Central Bank Digital Currencies. Fully trackable, fully traceable, but also — fully programmable. The novel feature of CBDCs is the ability to turn off someone’s dollars with the ease of restricting their Twitter account, and probably for the same reasons — or lack of reasons — and the same appeal process, which means none. CBDCs are a government tyrant’s dream come true. Total control, total authority. 

Financial Privacy is no longer a sacred right. Recent headlines prove this. One of the directives of the proposed addition of 87,000 IRS agents is to limit Venmo payments to $600 or less or suffer the consequences — an audit!! 

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Gold Historically
Outperforms Stocks

While no one can predict the future, notice how a balanced, more diversified portfolio performs over the long haul. Read More

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DJIA vs. a DJIA/Gold Portfolio Return
100% Dow Jones
80% Dow Jones / 20% Gold
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Gold Historically Outperforms Stocks

While no one can predict the future, notice how a balanced, more diversified portfolio performs over the long haul. Unlike stocks, gold is meant to be held long-term, because it has historically hedged other investment selloffs.

History clearly demonstrates that since 1970, gold has outperformed the stock market by 43%. Had you diversified a $100,000 portfolio in 2000 with 20% in gold and 80% in the DJIA, you would have $375,030 by the end of March, 2023 vs. $292,970 had you invested in the alone. That’s an extra $82,060 in your pocket with just a small allocation to precious metals. 

While gold can display volatility when uncertainty enters the market, over time, it has performed well. Why? Maybe because it’s tangible, in limited supply and globally consumed in many ways: jewelry, Central Bank hedging, industrial applications, currency hedging, investing, etc.

We have explored a few of the many reasons precious metals investors are not willing to bet their life on the dollar as it is inflated away. Is now the time to add precious metals to your portfolio? 

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In Gold?

Lear Capital is one of the highest rated precious metals investment dealers and offers one of the largest selections of metals in the United States.

We strive to keep our customers at the forefront of industry research and provide educational materials to help them make excellent decisions with their hard-earned investment dollars.

Access our Investor Kit to learn more about Lear Capital’s excellence in safety and security, and everything you need to know about investing in gold and silver.

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Lear Capital, Inc.’s (LCI) website and brochures and the other information it disseminates are for general educational purposes only. They are not and should not be considered investment advice. Customers may not rely on these general education/information materials for any purpose. The precious metals markets, moreover, are fluid and fast changing. Information provided herein may be superseded by intervening events.

LCI is not a financial planner, retirement specialist or investment professional. LCI does not provide legal advice, tax advice, or retirement-specific recommendations, and the information it provides does not take into account each customer’s particular economic circumstances and investment/retirement objectives. Your investment and retirement needs may be different and should be factored into any investment decision.

Each customer is responsible for doing his or her own independent research regarding any decisions he or she makes about purchasing precious metals through LCI or elsewhere.

Precious metals may appreciate, depreciate, or stay the same depending on a variety of factors. LCI cannot guarantee, and makes no representation, that precious metals will appreciate or appreciate sufficiently to make customer a profit. LCI’s precious metals prices include a spread (i.e., a margin over and above LCI’s cost for the physical precious metals). This spread covers LCI’s operating costs (such as rent, marketing and salaries) as well as LCI’s profits. LCI’s spreads are variable, but are typically in the range of 33% for Numismatic, Semi-Numismatic and IRA transactions. Customer’s precious metals must appreciate enough to cover this spread for customer to make a profit.

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