As you may have noticed, world markets have been a bit skittish recently. Of course, most are blaming President Trump's tariffs but really there are much deeper issues. Since the Federal Reserve was created in 1913, our dollar has been devalued by over 97%. This was exacerbated over the decades when hoarding (or just saving) gold by the populace was outlawed in 1933 by FDR's Executive Order 6102, when silver was removed from our circulating coins in 1965, and when President Nixon closed the gold window in 1971. It's no surprise that inflation of our fiat dollar took off like a bat out of hell in the 1970s and our money printers have been churning ever since.
Inflation reignited during the Covid crisis after the money printers went into overdrive, and the fed is still trying to stuff the rest of that pesky genie back into her bottle. Now we are about 37 trillion dollars in debt and other countries around the world are in similar messes with their own fiat currencies. As the stock and bond markets are showing signs of distress and gold continues to break new record highs (currently over $3300 an ounce and almost no one is talking about it!), it seems that a fiscal crisis is upon us. And the fed seems trapped between a rock and a hard place as their answer to such crises has always been to fire up the money printers, though continuing to do so would add to our already unsustainable debit and drive inflation much higher. While this is happening in the USA and also throughout the rest of the Western World, the BRICS countries are dumping our treasuries and planning to break from the constraints of our weaponized dollar. You see, we have issued the world's reserve currency since the Bretton Woods Agreement near the end of WWII, which has allowed us to live well beyond our means even as we shipped our factories and jobs overseas over the past several decades to countries where workers make about $2/day.
Since Basel III banking rules were developed in response to the Great Recession (2007 to 2009) and since fully phased in, the world's central banks have hoarded gold as a tier 1 asset (equivalent to cash). Many have speculated that the BRICS countries will release a gold-backed currency which seemingly would be much more desirable than unbacked fiat currency like our own. If this comes to pass, would our dollar lose its reserve currency status, and if so would this end in a hyperinflationary collapse? This has happened to many countries over the millennia dating back to the Roman Empire in the third century after they increased their money supply several times by diluting the amount of silver in the denarius (i.e. the money printing equivalent in ancient times). Many consider hyperinflation as the natural endgame of all fiat currencies. Germany experienced a particulary horrific period of hyperinflation in the years after WWI. In 1919, an ounce of gold traded for 170 German marks, and in 1923, the same amount of gold traded for 87 trillion German marks. More recently Zimbabwe had its own hyperinflationary collapse and began printing 100 trillion-dollar notes in 2008. Imagine living through that with your life savings held in their currencies which quickly became worthless.
So, the question everyone should be asking now is how do you protect yourself? We are not financial advisors and don't pretend to be, but there are some options to consider. Owning things with inherent value come to mind. Gold and silver seem to be a good start. Some use bitcoin to preserve wealth and it really has been an incredible wealth generator for its early adopters and insiders, but isn't it really just fiat that isn't backed by a government (serial numbers on paper notes vs. a digital ledger somewhere in the ether)? It's interesting that bitcoin has always been displayed in faux physical form as a gold coin, but it is not gold. Tulip bulbs were also an incredible wealth generator in Holland in the 1630s. The prized Semper Augustus tulip sold for 5,000 to 10,000 guilders/each during the peak of tulip mania. Dutch guilders at the time each contained 0.77 ounces of gold, so each of these tulip bulbs cost up to 7700 ounces of gold! As of today, a bitcoin costs $84,631 or 25.43 ounces of gold, so is it a relative bargain? Had a wise Dutchmen saved the gold equivalent of just one Semper Augustus tulip at its peak price in 1637 and it was held until today, his family's fortune would be $25,617,900. Like all other speculative asset bubble manias, it quickly collapsed. In the years since, those left holding the bag (of tulips) could at least still plant them in their yards and enjoy them for a few weeks every Spring.
Our Founding Fathers established gold and silver as the legal tender of the United States. The US Constitution, in Article I, Section 10, states that no state shall make anything but gold and silver coin a tender in payment of debts. They knew that unbacked fiat currency could be used by evil men and corrupt government officials to enrich themselves at the expense of their people. As Thomas Jefferson declared, "I believe that banking institutions are more dangerous to our liberties than standing armies," and added that private banks controlling currency could lead to the dispossession of the people. Jefferson also criticized the practice of funding debts that would be paid by future generations, calling it "swindling futurity on a large scale". I think he's been proven correct.
So far, our government has "swindled" future generations out of 37 trillion. The annual cost to service this debit is currently over one trillion dollars and set to grow rapidly as shorter-term notes held at the near zero rates of the post-Great Recession era get rolled over at prevailing much higher rates. According to Gemini AI, a stack of 37 trillion one-dollar bills would encircle the Earth at its equator 100.84 times! It helps to visualize the enormity of this debit, and realize that this is only our country's debit. Conceivably, the debit of all nations of the world in the single denomination of their own fiat currencies might cover the earth completely, or nearly so. So collectively it seems, we're heading towards flat broke when measured in fiat.
Even if President Trump and Elon Musk's planned visit to Fort Knox reveals that all the gold is still there (and I really hope that it is!), the value of that gold today is estimated to be $492.57 billion USD, or only about 1.33% of our national debit. A similarly concerning drop in the bucket is the FDIC's Deposit Insurance Fund's reserve ratio, which was 1.28% as of December 31, 2024. Good luck if the widespread bank runs of the Great Depression era ever rematerialize.
So, with all of that, President Trump's tariffs may end up being the needle that finally pops the "Everything Bubble". No one knows for sure, but that bubble has been pumped up with funny money for decades and seems to have been searching for a needle in a haystack of fiat. Meme stocks, NFTs, the stock market overall and in particular the Magnificent Seven, cryptocurrencies, real-estate, and some commodities including lumber have all hit frothy valuations as the "Everything Bubble" expansion accelerated further with post-Covid stimulus dollars. Not until very recently have the precious metals and their miners started to participate. Silver has moved nicely off it's Covid-crash bottom of $11.77/ounce though still (at $32.52) is well below it's two prior peaks of close to $50/ounce in 1980 and again in 2011. Relative to it's 1980 peak, silver in today's dollars is still 593% lower than that price peak from 45 years ago, while inane "investments" like FARTCOIN skyrocket 23,500,000% from around the time of its launch in mid-October 2024 through today! How can this be? Tulip mania lives!
I enjoyed trying out Gemini AI today to generate the below pictures that are worth a look and are something to consider as you decide for yourself how to protect your wealth when the "Everything Bubble" finally pops. We hope you have a wonderful Easter Sunday with those you love and as we always like to suggest, Own What's Rare!
