Last time I wrote about currencies and how it’s important to our wealth to understand the changes happening to them.
Everything moves in cycles – even money.
It’s important to recognize where we are in a cycle so you can plan accordingly. Even though investments may do well for 30 years (like bonds),there’s a time for them not to do well. That time is coming.
The US dollar has been the world’s reserve currency since the BrettonWoods agreement was signed in 1944. Forty-four countries adopted a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar. That is changing.
China and Russia now trade oil without using the dollar. Other countries like Brazil are discussing no longer using the Petro-dollar. Mexico has even passed a law that US dollars cannot be accepted in stores anymore, only pesos.
Why is this important for you to know? Because this is a worldwide change happening at the most fundamental level – with our money.
The US dollar has been steadily losing value as has the British Pound and the Euro. Nothing goes down in a straight line, but the trend is down and the large debt governments have accumulated affects it. Of course, the currency that is appreciating against others is the Chinese Yuan.
How do you protect your money and your purchasing power against prices of imports like food, clothing, and building materials escalating? The only way to protect yourself (from a declining currency) is to get out of paper assets – cash, saving accounts, CD’s, bonds – and into precious metals, farmland, and commodities like agriculture (symbols: MOO or DBA), energy, etc.
It sounds odd, but when a currency is in a major decline, what used to be safe is now risky and what used to be risky is now safe! No wonder people are confused!
The trend has been up in precious metals for 10 years, yet many people still don’t own them. Since they’ve really been above trend this year, I wouldn’t be surprised to see a pullback in the April to June timeframe. Should this occur, it will be a great buying opportunity. You can buy coins, physical gold funds like CEF and GTU, or groups of mining stocks GDX and GDXJ.
Another way is to buy the Yuan ETF who’s symbol is CYB. When the dollar declines low enough, people will be stampeding into assets like this to protect themselves.
Even if the stock market is increasing, if your currency is decreasing in value, you’re not getting ahead. The only way to get ahead and build more wealth or maintain your wealth is to hold tangible assets like those I’ve mentioned above.
I believe the good news is, tremendous wealth will be made by those owning assets like this early. The time may come when gold stocks fly like internet stocks did in 1999 and a lot of new wealth will be created for those positioned in the right cycle. Time to get ready.