QUESTION: I want to share a true story with you.
My father as a young boy in Greece saw what gold did for his family. My grandfather in Greece in the late 30′s and 40′s saw the rapid devaluation
happening to the drachma. English sovereigns were plentiful there at the time as a sort of duo currency. As you can probably figure out he was converting any of his cash to gold sovereigns.
My question to you is why do you protect the American dollar and not the people of the world from the rapid devaluation of their savings.
ANSWER: This is the entire problem with currency – people do not truly understand it and attribute to a single object value that does not truly exist. You can “think: it was gold that rose, but was it simply that the Drachma declined? The difference is critical. If ONLY gold rose then what you say would be correct. But if EVERYTHING rose, you are wrong.
During the 1970s, I always bought German cars. A Porsche cost me $10,000 in 1970 and by 1980 it was $50,000. To this day, the Italian Ferrari is bought and held as an “investment” because people CONFUSE currency with the object. Is it really a Ferrari that is rising in value or is it currency? When the pound crashed into 1985, a 318 Ferrari, which was a £32,000 car when the pound was $2.40 fell to about $32,000 when the pound fell to $1.03. I bought a Ferrari in London and drove it around for two years there. Because the pound crashed, the Italians raised the price to £60,000, which was on par for what the car cost in the USA. But the pound rallied back to nearly $2 and after driving it for 2 years, I sold it for twice the dollars I had paid. Did I make money on the Ferrari? Or was I just playing foreign exchange? It was currency not the car. I could tell my posterity the same story without the currency and say Ferrari is the best investment ever.
