If you are anything like me, then you are a saver. You like to squirrel money away for unforeseen expenses or maybe just a rainy day. You savor the peace of mind that saving gives you – the knowledge that if bad times come, you will be as ready for them as you can be.
There are a lot of different ways that people save. Some like high yield savings accounts while others swear by U.S. savings bonds. Money market funds are another popular choice. A few more sophisticated savers even use Treasury Direct to buy U.S. Treasury bills straight from the government.
All of these savings methods are viable choices, with their individual advantages and disadvantages. Or at least they used to be viable savings choices. Unfortunately, over the past 15 years the financial authorities have gone out of their way to make life tough for savers.
The U.S. Federal Reserve (along with every other central bank in existence) has suppressed interest rates, ensuring that savers do not get a fair return on their rainy day fund. Stocks and bonds aren’t a solution to the savings problem either. Not only are they far too volatile to be a good savings vehicle, but they are also egregiously overvalued at the moment. Even the U.S. Treasury has done their part to stick it to savers by systematically changing the terms of U.S. savings bonds to make them less attractive.
That’s why I recently sat down with my wife to have “The Talk”. The Talk is where I calmly and straightforwardly explained to my wife that in the very near future we will have to start doing some very unconventional things in order to preserve our existing wealth. The broad equity and fixed income markets are simply not going to be appropriate long term solutions for wealth building.
At the same time we also needed a new savings strategy. The days of keeping an ever growing stash of cash in a bank savings account is rapidly coming to a close. This isn’t because I believe massive inflation is imminent. But, at the same time I fully understand that the days of U.S. dollar hegemony are slowly, tentatively coming to a close. So dollars are fine for now, but it is wise to plan ahead for the tumultuous financial future that is visible on the horizon.
After all, you don’t want to be racing all the other late-comers for the few remaining good assets when everything begins to unwind financially. Also, investment diversification is, generally speaking, a good thing – a dictum that applies to savings diversification as well. I don’t want to be a slave to my U.S. dollar holdings.
So what exactly does my new savings strategy look like? I have just three words: gold and silver. In one sense, this is not a particularly groundbreaking savings strategy. In fact, it is quite the opposite.
Gold and silver have been considered money for thousands of years. The flourishing trade of the ancient Greek economy was based on the silver drachm, a coin of about 4 grams (0.1286 troy ounces). The medieval Islamic caliphates fueled their extensive trade networks with gold dinars, which also weighed around 4 grams. More recently, the British pound was the envy of the world before 1931, when each pound could be exchanged for 0.2354 troy ounces (7.32 grams) of pure gold.
These historical examples underscore just how normal it was for strong currencies to be denominated in, or convertible into, gold or silver. It is really only within the last 50 years that governments definitively broke the link between precious metals and money. For instance, the U.S. Treasury only stopped exchanging silver certificates for raw silver in 1968. And President Richard Nixon only suspended the convertibility of U.S. dollars into gold in 1971.
Unfortunately for savers, the outcome of our great monetary experiment with pure fiat currencies has been predictably bad. Savers have been systematically disadvantaged in order to “save the system” for big businesses and financial speculators.
And that’s why my wife and I had The Talk. We desperately needed a new savings strategy for the modern era.
So here is my idea. I plan on converting some of our dollar denominated savings into silver. Of course, I always like to put a twist on most financial strategies I implement, and my new savings strategy is no different. Instead of just buying the cheapest silver bullion I can find, I will buy carefully selected hand-poured silver bars.
It has been clear for a while that vintage poured silver bars are one of the hottest categories in the world of antiques. For example, vintage Engelhard and Johnson Matthey poured silver bars regularly sell for well over their bullion value.
But modern hand-poured silver bars offer an interesting alternative savings strategy. They not only have low premiums that are only modestly higher than boring struck and extruded silver bars, but also have the potential to appreciate beyond their intrinsic value. I already documented my very pleasant experience with purchasing a Yeager’s Poured Silver grab bag last year. I intend to replicate this approach with other poured silver manufacturers.
There is only one major issue with my new savings strategy: psychology. Most savers have been conditioned to view dollars as savings and spending dollars as dis-savings. And, under normal circumstances, this would be absolutely true.
But we are no longer living in an age of rationality. Instead, we are living in a time when central banks nonchalantly monetize trillions of dollars of government debt, crypto-currencies regularly yo-yo between 50% gains and losses in a single 48 hour period and Amazon stock trades at an utterly unhinged P/E ratio of 202. Against an investment backdrop like this, savers need to start thinking unconventionally.
So here is my take. U.S. dollars are still savings, but now I consider gold and silver bullion to be savings as well. Not only is bullion low risk, with little possibility for loss, but it also can’t be printed by central banks on a whim. And that is exactly what I’m looking for in a savings strategy!
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