Do you know the difference between money and currency? Most people don't, and if you wish to use the strategies discussed in this book, you must understand the distinction. Many people think that the U.S. dollar is money, and refer to it as such in their daily language, but the reality is that the U.S. dollar has never been money. It is currency. Currency is paper money that is used in exchange for goods and services. The word “currency” comes from the word “current.”
The paper money used today is “currently” the medium of exchange that is used for goods and services, and the only thing that guarantees its viability is the government itself. If the government collapses, or is replaced by a new government, this currency becomes no longer “current,” meaning it is worthless. The U.S. dollar, and all other paper currencies of the world, whether it is the Mexican Peso, the Brazilian Real, the Chinese Yuan, or the Russian Ruble, are all inherently worthless.
They are only “useful” because the governments of all these countries demand all payments to be made in them. But according to the laws of economics, they have no true intrinsic value, meaning they can't be used for anything else other than as a medium of exchange for real goods and services. When I say “intrinsic value,” I mean that, if you strip away the ability of these paper currencies to be used in exchange for goods and services, then they would have no use at all. They can be burned to provide heat, but this is about it. They have no industrial properties which make them valuable, and because the government can print as much as it wants, they tend to lose value over time.
And of course, this is precisely what happens. Governments, regardless of what nation they exist in, over time tend to become corrupt and too large. To pay for the cost of government, money must be generated, and this means that central banks expand the money supply by printing. The people who get access to this money first get to use it to make all types of investments and deals, and they become wealthy, but as the money trickles down into society, the cost of living goes up, and as a result, everyone else become more poor, though they may not recognize it at first.
When governments take the printing of money to the extreme, they can cause a phenomenon which is called “hyperinflation,” a situation where the value of the money falls rapidly, and the prices of everyday goods and services reach extraordinary levels. This has happened many times throughout history, and it will happen many times in the future, so long as humans use paper money as a medium of exchange.
What Does this All Mean For You?
Now that you know your money is consistently being devalued without you actually seeing it, you must take the necessary steps to preserve your purchasing power today so that you can become a cash flow investor tomorrow. If you fail to take this step, everything you've learned in this book will be in vain, simply because the government will steal the money that you've sweat for as a freelancer. You must not allow this to happen. The solution to the problem is to convert a portion of your savings into gold and silver, and do so periodically as you save your way to $100,000.
Why gold and silver you ask? The answer to this is because gold and silver, unlike the U.S. Dollar, Real, Ruble, and Yuan, are “real” money. What I mean by this is that the government can never print gold and silver out of thin air, which means its the liability of no one, and its value will be maintained over time. About a year or so ago, I read on the news that divers successfully recovered a ship containing gold coins that had sunk 500 years ago. This gold was worth hundreds of millions. What may surprise you is that there is not a single paper currency in existence that has lasted more than 200 years. What this means is that gold and silver is inflation proof, and if you put a portion of your money in it, your money will also be inflation proof, meaning its purchasing power will remain stable over time. Unlike billions of people around the world, you will not be subject to the inflation tax, and as I said early in this book, you can become rich very quickly by reducing or eliminating your taxes.
It is best to convert a minimum of 12% of your money into silver and gold. While some gold bugs will tell you to put in more than 20%, twelve percent is more than sufficient. As your savings grow, you will want to make sure this conversion of 12% remains. For instance, once your savings reach $10,000, you should have $1200 in gold and silver. Once your savings reach $100,000, you should have $12,000 of it in gold and silver.
One more thing. When we say “convert 12% of your savings into gold and silver,” we are not talking about buying silver and gold jewelry, paper contracts, and other instruments. Only buy coins, both bullion and numismatic coins, as these will give you the best return on your investment.