Saturday, October 5th 2024
Paper money is our main currency today. Dollar bills in the United States, Pounds in the UK, Yen in Japan, etc. This currency is easy for us because it can be used anywhere. On the other hand, a lot of investors love gold (and other precious metal) IRAs because they allow you to purchase a physical item to back your investment with.
Those considering opening a gold backed IRA could benefit from taking the time to explore the differences between paper money and precious metals. Today we are going to examine that.
Paper Money Convenience
Paper money has the benefit of being easy to use. We can carry it easily, go to just about any store to spend it, and it can be easily converted when traveling. This makes paper currency far more popular for everyday use. But it does have the risk of excessive creation and is easily affected by inflation.
Some companies and countries are making pushes to make precious metals like gold and silver easier to use for transactions.
The Risk of Overprinting
Paper is widely available. Governments around the world can print as much as they want. There is no scarcity to secure its value. Precious metals are called precious for a reason, they cannot be created artificially and the world only has a limited supply of them. You can fake the precious metals but they can easily be spotted.
Another problem with paper currencies is that they are tied to a specific country. If that country starts to undergo any kind of turmoil, it can and will affect the value of the currency. Germany and Zimbabwe have both seen good examples of what can happen when a government stresses on the value of their currency and prints a large amount at one time.
Now that computers print currency a lot of people think that it can be easily controlled. That is somewhat true but even a moderate amount of currency added into the world can change the value of a currency and cause problems. The United States saw this in the 70’s.
Precious Metals and Their Value
Precious metal availability is controlled by nature and the amount that we are able to harvest from around the world. That means that they have the advantage of holding their value far better than any human created currency.
The central banks monitor the value of currencies around the world. One of their jobs is to track to see if inflation is getting out of hand. As history, and the central banks, have seen, inflation can get out of hand, even by accident. When you use a paper currency you are putting your faith in the fact that the central banks are able to take action before currency becomes too devalued.
Those who have precious metal as part of their investments are able to have a peace of mind that while metal’s value may fluctuate, it never plummates uncontrollably. Even when the value of precious metals goes down, it comes back up. It is one of the oldest currencies in the world.
While you may be able to use paper currency easily, it is pretty obvious why precious metals can be a major asset for your savings. This is why many people consider investing in precious metals in the first place.