Bullion is a Form of Savings (Short-Intro to #steemsilvergold)
I have been buying bullion as a form of savings since the age of twelve. Unlike most I don't view it as an investment, but rather as the most liquid form of money accepted anywhere in the world. Since ancient times bullion has withstood all the tests of money.
Aristotle's Rules of Money.
Durable: Money must stand the test of time and the elements. It must not fade, corrode, or change through time.
Portable: Good money needs to hold a high amount of 'worth' relative to its weight and size.
Divisible: Money should be relatively easy to separate and re-combine without affecting its fundamental characteristics. An extension of this idea is that the item should be 'fungible', defined as 'being freely exchangeable or replaceable, in whole or in part, for another of like nature or kind.
Intrinsically Valuable: This value of money should be independent of any other object and contained in the money itself, starting with rarity.
Fiat fluctuates daily, but bullion still buys the same quantity of assets as a hundred years ago. Let's just keep it simple,—because of its stability gold is a superb way to measure other asset valuations. They always say an ounce of gold can buy a decent suit at anytime, this remains true.
Please check out my recent post: A Chart Every Goldbug should Understand and Every Cryptobug should Wish to Change
Sources:
- Lee, John. "Aristotle and the Definition of Money." :: The Market Oracle. N.p., 30 Apr. 2009. Web. 27 Sept. 2012.
"Gold and silver are money, everything else is credit" JP Morgan
Gold, silver, cash and cryptos should all be considered savings. They have no counter-party risk and therefore represent pure form of wealth storage on which to build your investment portfolio.
Good point, however, I would question cash. Cash can be printed by the issuer (central bank) in infinite quantities, is this not counter-party risk?
That said, physical cash in hand is far superior to a deposit in the bank, or any form of 'savings' such as a pension. I do hold cash (as well as metals and cryptos), and in a banking collapse (which I view as an inevitability) actual fiat notes and coins could be at a premium to bank deposits. As we saw in the 2012 Cypriot financial crisis, people were limited to how much cash they could withdraw from their own accounts. These people had to learn the hard way that the money you think you own in the bank is not actually your property any more.
Yes physical cash in hand, not because it is without counter-party risk but because it is necessary until something else becomes your currency of choice. Also, it will rise in value during chaotic times... especially U.S. dollars because of the current dollar-denominated debt that needs to be serviced around the world.
It's not a permanent part of your savings. And no cash in the bank is not holding cash. Banks, as you point out, are a source of counter-party risk.
I would argue crypto has some risk, and is currently still a speculation rather than an investment.
Risk, yes. Counter-Party risk is different. There are the same risks with buying cryptos (theft) that there are with gold/silver/cash.
Counter-Party Risk assumes a claim against that asset by some other person that is built into the asset itself. Examples are stocks, bonds, gold futures contracts, physical ETF's, dollars.
If someone else is the guarantor of your asset, it has Counter-Party Risk, and therefore can be a currency but not savings.
Crypto also has futures.
then Crypto futures have Counter-Party risk. Paper gold is not gold. Crypto Futures are not Cyrptos. They are both derivatives and derivatives, by definition, have Counter-Party risk. These are different instruments.
It's an important distinction because many people think they own gold by buying the GLD ETF, or a futures contract. They don't. The value of those things in a normally functioning market relates directly to the underlying asset's price, but.... in an illiquid market?
No, they don't. And that's the main difference. Moreover, you can be force majeure'd out of your position by the owner of the exchange, the trustee of the ETF, etc.
Their existence will effect the exchange rate but the Ethereum in my wallet cannot be taken from me if your futures contract gets margin-called.
True, but I have noticed it affect the price on other exchanges, and often the futures price leads the other exchanges.
They have an effect on prices, most definitely... and they perform a very valuable market function. Do not get me wrong about that. I'm just pedantically defining terms.
There is a line between what is savings and what is investing and that line is 'counter-party risk.' That's all I was trying to get across. It's important people make that distinction.
Risk depends on your perspective. A person who does all of his business in bitocoin doesn't care about the BTC/USD ratio. But, those that use both do.
I keep cash only as a form of emergency fund in the case of a bank shutdown, and cash is hard to come by. Other than that I'm always stacking, buying and researching cyptocurrencies, and buying guns and ammo!
Great post dude, upvoted. I just put my first post to #steemsilvergold a few minutes ago. You are followed.
Thanks! :D
dang!..wish I started young. Started April 2014, before that I didn't even know what a American Silver Eagle was.
Haha yeah! I remember when I was like 6 and my dad would take me to the coin-shop to buy silver coins for like $4.00 or $5.00.
Are there some excellent parents in the background? Age 12, tip of the hat!