Tag: Money

Silver is shining

Over $US20 a troy ounce and rising!


Long before silver was being used in your smartphones, television sets and ipads – silver was money, just like gold.



Countries over the world have implemented various types of silver monetary standards, at various stages throughout their history. In fact, the US was still using 90% silver coins up until 1964 and 40% silver in their coins until 1970.

Today silver seems to be used for everything but money. Electronics. Solar Cells. Jewellery. Antibacterial clothing and medical equipment. Water purifiers.

However, there is a devoted group of conservatives, called Silver Stackers. Us Stackers believe that one day the world will return to ‘Good Money’ and that silver will have a large roll to play in this. Because unlike paper currency –

You can’t print silver!

And it is relatively scarce – just as money is meant to be.

Today us stackers have cause for celebration. The spot price of silver has finally broken $US20 – the first time since 2016.

Of course, if you are wanting to buy physical silver, expect to pay a lot more than $US20. However, it is certainly nice to see the futures price catching up to reality.

As a part of your Financial Awakening – I suggest you learn all you can about silver.

Goldsmith


How to save your marriage, ladies!

Because there is nothing more expensive than a divorce.


You will find that there is nothing more expensive in this world than a divorce. So if you can save your relationship — well you have just saved yourself a fortune.


Photo by Thái Huỳnh on Pexels.com

Last night at Goldsmith Money (YouTube), we examined a Medium article titled ‘Hidden in Plain Sight: What Women Need To Know About What Makes Men Happy’.

The article was first published by Relationship Counsellor Deborah Fox in 2017, republished by Medium’s The Good Men Project, on 10 April 2020.

The article resonated with me — a husband and partner of nearly 20 years. It touched on what I consider to be some quality tips for maintaining the emotional connections and communication within a long term relationship. And all from a woman’s perspective!

If this video saves just one marriage and the enormous associated costs – we will consider it a success.

Please enjoy and share with that special someone in your life.

And if you do enjoy it – please be sure to hit LIKE and Subscribe to the Goldsmith Money YouTube channel

https://www.youtube.com/channel/UCrQ5nZRg–SGa4LFjB7s_0A/

Thank you.

GOLDSMITH



This video is one man’s opinion and general discussion only. It did not take into account your personal or financial situation. Before acting upon anything you see or hear in this video, you should seek personal and professional advice.


Good Money and Cryptocurrency

Could cryptocurrency be considered ‘good money’?


In our previous two posts on the topic of cryptocurrency, we learned what blockchain and cryptocurrency is and briefly examined the technological leaps it had made over the past decade.

In this post we shift our focus back to GOOD MONEY, by asking the question – does cryptocurrency really cover all the criteria necessary to be considered ‘good’ money?


Photo by Worldspectrum on Pexels.com

Let’s revisit the criteria – one at a time.

  1. A Store of Value

    This is the most contentiously argued point in regard to cryptocurrency being considered ‘good money’. 

    Some argue there is simply no store of value for a unit of cryptocurrency whatsoever, and its price is merely a result of speculation. I do not accept this premise.

    There is an inherent value in the computing infrastructure which runs the individual blockchains. There is value derived from the skills, efforts and energies of those actively maintaining and developing the capabilities of these cryptocurrency networks and platforms.

    There is value being created by those developing the applications to tap into these blockchains.

    There is ultimately value being derived from the use and adoption.

    I will accept the argument that if the internet fails and the world stops producing electricity, and as such cryptocurrencies have no value. However, the likelihood of this happening in our modern world is so extremely minute – it is a poor argument. Besides, if for some reason we lost the internet or our ability to produce electricity on a global scale – we would have much bigger problems to worry about than how we access our cryptocurrency tokens.

    Finally, it is argued that the creation of new tokens at a rate in excess of the growth of the participation in that particular blockchain will be value destructive, similar to the destruction in the value of the dollar. However, unlike dollars,  blockchain currency expansion can be easily monitored and the market is able to adjust prices accordingly.

    So I would argue, YES, cryptocurrency can be a store of value. Especially those cryptocurrencies which end up being highly utilised and responsibly governed.
  2. Scarce and difficult to create

    Within an individual cryptocurrency network, all tokens can be seen and are only ever created as per the rules of that blockchain.  The rules of an individual blockchain can be altered. However, this is transparent for all involved and therefore the market can reprice tokens based on the changes.

    In cryptocurrency, inflation is measured in its true sense – as the expansion of the token supply.  So unlike dollars, where nobody knows how many dollars are actually in circulation – cryptocurrencies are very much a known quantity and inflation can be measured with 100% accuracy.

    It is true that new cryptocurrency blockchains can be created quite easily. Creation of a new cryptocurrency though is akin to the creation of a new monetary system, not inflation of the current. There is no guarantee that this new monetary system will be adopted though and  new cryptocurrencies do act as competition for the existing. Which is not a bad thing in that it is keeping the blockchain engineers and application developers busy constructing bigger and better financial ecosystems.
  3. Generally acceptable.

    Cryptocurrencies such as Bitcoin are growing in acceptance.  It is believed that over 20 million people worldwide are using Bitcoin and other currencies on a regular basis.  More and more desktop and mobile wallet applications are being developed to facilitate quick and easy trade. 

    Some countries are considered to be very friendly toward cryptocurrency based trade and business development. Some of these countries include: Malta; Switzerland; Singapore; Honk Kong; Japan Belarus; and, Estonia.

    We have had indications out of Russia and China that they are working on their own national cryptocurrencies, which in itself would compel acceptance.

    There has been speculation that Chinese and Russian cryptocurrency tokens might be backed by their national gold reserves – which would resolve any question around ‘Store of Value’. 

    The concept of a gold backed cryptocurrency would freely encourage mass adoption, quickly becoming an accepted and desirable medium of exchange. It is for this reason that I do not speculate in Bitcoin. A gold backed cryptocurrency, where say a single cryptocurrency token could be exchanged for a gram of gold, might end Bitcoin’s appeal very quickly.
  1. Trustless

    A decentralised cryptocurrency such as Bitcoin has no single point of failure as it is run on computers all over the world simultaneously.

    Furthermore, a Bitcoin held on the Bitcoin blockchain belongs only to the one who holds the private key to the account. Meaning the Bitcoin is not the liability of a bank or other third party. As such, we should consider cryptocurrency to be trustless.
  2. Durable and indestructible

    As mentioned previously, Bitcoin is the most powerful decentralised computer network on the planet.  It would be virtually impossible for a hacker, company or government to bring down the network. This makes Bitcoin virtually indestructible. There is no reason that other blockchains will not be constructed with similar or even enhanced durability and indestructibility features.
  3. Portable

    Accessing your cryptocurrency can be as easy as carrying around a unique 50 digit password in your pocket. This password can be easily carried anywhere in the world.

    To access the cryptocurrency you simply need a PC or mobile phone wallet. Establishing a wallet is now as easy as downloading a free Android or App Store app.  Try setting up a bank account this quickly.
  4. Divisible

    Yes! Generally speaking a cryptocurrency can be divided up into smaller units – often utilising between 4-6 decimal places.
  5. Homogenous and fungible

    Yes! Every Bitcoin is the same as every other Bitcoin on that blockchain. Other blockchains are similar in that their native tokens are identical.

It is clear that ‘cryptocurrency’ may have all the characteristics of ‘good money’, yet as established previously, ‘fiat currencies‘ do not. For this very reason it is possible that those in government, banking and finance will attempt to regulate cryptocurrency and/or discredit it.  Afterall, if you were allowed to print all the currency you wanted to – wouldn’t you try to put a stop to a competing system, which does not? 

Regardless, the world of blockchain is here to stay and the disruption to the established monetary and banking systems will be total.

Instantaneous and free international transactions will be available on trustless and infallible payment systems.

Public blockchains, private blockchains and national blockchains are all possibilities. Blockchains with physical backing of precious metals and other commodities and resources are likely to emerge.

The winners and losers with regard to blockchain is the unknown. However, over the next 10 years expect that the complete replacement of current systems will take place. And for the Financial Awakened – there will be a smorgasbord of opportunities.

In coming posts we will look at some of the opportunities which have already begun to arise. Please be sure to subscribe.

GOLDSMITH


Good Money and the Dollar 3

Part 3 – Dollars are not trustless!


Our analysis of the ‘dollar’ in respect to the ‘8 characteristics of good money‘ detailed at Good Money continues. In this post we ask – are dollars trustless?


Photo by maitree rimthong on Pexels.com

The only reason a paper currency has any type of value is because a government says it does – not for any other reason. So we start by trusting the government to protect the value of these dollars.

So what if this government simply turned around and stated – ‘Those dollars we told you to trustwell sorry, you’re not allowed to use them any longer!’

This was exactly what happened in India. With the stroke of a pen, President Modi banned all 500 rupee and 1,000 rupee denominated notes effective 31 December 2016. 

Under the guise of eliminating cash from the black economy, the plan also had the impact of flushing out savings of law abiding Indian citizens. Those savings were then forced into banking institutions. 

You might think, ‘this is not so bad’. Well not so bad if you trust the banks and you were able to get to one in time to deposit your rupees. However if you were in a village without a bank and lacked the transportation to get to one, this policy change might have been a financial disaster.

Think this can’t happen to our Australian dollars? Wrong! There have been reports for many years now that the Australian Government was looking to abolish the $100 note. There is also talk about getting rid of cash in Australia altogether – thereby forcing everyone to become a creditor of the banks.

Currently being debated in Australian Parliament is a bill banning cash payments of over $10,000, subject to a two year jail sentence. Imagine, two years jail for using your country’s legal tender.

So in India, and probably in Australia – great sums of cash are being forced out of the cash economy and into the banks. So you might now ask – ‘once done, the dollars will now be safe in the banks right?’

‘Wrong!’.

In 2013 the Government of Cyprus simply seized a percentage of all funds sitting in Cyprus bank accounts.  Account holders woke up one morning to find their bank accounts pilfered by the very people they had elected to represent them in parliament.

Other countries are introducing so called ‘bail-in’ provisions. Should a bank experience financial difficulties, the dollars of depositors would be automatically converted to ordinary shares, to ensure that other creditors of the bank can be paid out first.

When it comes to TRUST – you now know that when holding cash you are trusting your government to protect the integrity of those dollars.  You also know that once you deposit the cash with the bank, you are now both reliant on the government to protect the integrity of the dollars and on the bank to remain solvent.

So NO, dollars are NOT trustless!


Of the ‘8 characteristics of good money‘ – modern day fiat currencies fail at least 3, being:

  1. Dollars are not a good store of value due to inflation.
  2. Dollars are not difficult to create, as financial institutions simply create currency with each loan they write.
  3. Dollars are not trustless, as you must either trust the government to honour and protect the currency in circulation; and, you must trust the banks who you deposit these dollars with.

Understanding what constitutes ‘good’ and ‘bad’ money is necessary for your Financial Awakening. This does not mean that we should be avoiding cash and bank deposits – this is not practical or even desired. 

What it does mean is that we need to understand the risks and opportunities associated with holding dollars and we will structure our financial affairs accordingly.

Next time I address the topic of Our Money, I will examine types of money which have all the characteristics to be considered ‘good money’.

GOLDSMITH


Risk-Free Return


The third foundation block, paramount in your financial awakening is an understanding of the Risk-Free Return. I say paramount, as before you make any investment decision you should know exactly what return you can make, taking zero (or near to zero) investment risk.


Why take on additional risks, when you can reach your destination safely?


When it comes to risk-free returns there are different types, depending on who you are and the country in which your reside. 

In the case of an Australian Citizen, I consider that there are 5 types of risk-free returns… plus… 1 risk-free asset worth an introductory mention.

The first of the risk-free returns is the $US 10 year treasury bond – considered the risk-free investment of choice for bankers and fund managers the world over for 3 generations – currently paying interest of 1.47%pa.

The second, for an Australian, would be an Australian Government Bond – currently paying 0.93%pa.

The third would be a term deposit with a Big 4 Australian Banking institution – currently 1.5%pa

Presently, funds held on account with any Australian financial institution are backed by the Government Guarantee up to $250,000 per entity, per institution.  As such a term deposit with a small Credit Union, has about as much risk of default as an Australian Government Bond. So forth, other term deposits. Currently 1.75%pa.

The fifth risk-free return – is the most important risk-free return of them all. It is generally a tax-free return and its nature is ‘debt reduction’. These ‘debt reduction’ measures might include, assuming no early payout penalties:

  1. Early repayment of a home loan – will currently save you circa 3% pa.
  2. Early repayment of an investment loan – should save you 3-4%pa.
  3. Early repayment of a credit card – save 20% pa.
  4. Holding cash in a 100% loan offset account – save 3-4% pa.

Before you make any investment decision you must at least give consideration to these 5 risk-free return opportunities, as described above and particularly the last. However, please be sure to ask about any early payout penalties on loans and other finance you might been looking to repay.

Over the coming weeks I will provide you with examples on how to apply the risk free-return concept to your financial decision making processes.

Now I mentioned that there was also a single ‘risk-free asset’. Care to take a guess what this might be?

Occasionally it is referred to as a ‘barbaric relic of a bygone era’.

The bankers and the ultra-rich have been telling you it is worthless for 120 years. ‘Just a commodity’ they say. Yet over the past 20 years alone, this risk-free asset has grown in value by approximately 450%. 

In case you haven’t guessed already – this risk-free asset is… GOLD. Yes, GOLD is a ‘risk-free’asset.

It is important to be clear here. GOLD is not risk-free because it provides you with guaranteed income or annual capital growth. Physically held GOLD is risk-free, because it is not a liability of any other party. Meaning there is no risk of default.

Don’t just take my word for it though. On 31 March 2019, GOLD was reclassified as a ‘Tier 1’ asset under the Basel III International Regulatory Accord. Meaning that for the purpose of International Banking Standards, GOLD is now always considered a ‘ZERO risk asset’.

We will be discussing GOLD in much more detail here at the Financial Awakening, over the months and years to come. And with great personal pride and pleasure.

GOLDSMITH


Image by Hermann Schmider from Pixabay