Book Summary: A Guide to Investing in Gold and Silver – Written by Michael Maloney

This is a great textbook on real money. Mike provides an overview of sound money principles that have persisted throughout human history. One thing is constant and that is that gold and silver are real money. In today’s world of fiat currencies, gold and silver are tools you can use to preserve and protect your wealth. Mike discusses the differences between currencies, real money, and fiat money. Fiat currency is basically paper money that is not backed by anything. We will detail why this is dangerous, and the average investor should at least understand the meaning of debased money and bloated fiat currencies. With the economic collapse of 2008 along with Ireland, Greece and other bankrupt countries, we as retail investors need to be educated so we can protect ourselves.

Why is this important to me?

This is important because the greatest transfer of wealth is happening right now, and that transfer is moving away from America, not towards us. This must be a priority if you want to protect yourself and your family.

Several things are happening, but 90% of the public don’t really get it. This is understandable as the noise between the political bobbleheads on CNN and Fox News distracts from the real issues. The real problem is this: The Federal Reserve is a private institution that is unregulated and unaudited. They control the financial system. These guys are the epitome of kingmakers running the country from behind the scenes. Admittedly, Thomas Jefferson was opposed to a central bank in the United States. For more information on this subject, you can listen to Ron Paul. He’s the congressman from Texas involved in this stuff all over the place.

The big swings we’ve seen from the internet boom to the housing bust were a direct result of the Fed. Not many people know this and some will complain that this is wrong. The Fed has kept interest rates artificially low, which has created the bloated housing market. The eased debt to equity and the financial instruments of mass destruction known as CDOs and MBSs and other weapons nearly killed the country. Financial education is necessary so that we little ones have a chance. Read this book to open your eyes. One thing that is not being said in the mainstream media and is stronger than terrorism is this: If the dollar is lost as the world’s reserve currency, our overall standard of living will drop by at least 25%. Already, 85% of American families are finding it difficult. Another wealth transfer could be the final nail in the coffin. get formed

There is a lot of information in Mike’s book. The history of currency debasement is outlined by every great empire, including Persian, Greek, Roman, British and now American. Currency debasement, inflation and taxation are the wealth thieves. If your money is a candle, then taxes and inflation are the flames burning at both ends.

1. Resourcefulness – I am not a person of doom and gloom. I believe in the strength and determination of the American people. However, this does not prevent that we all need to be educated and the only way to change is from the bottom up. There is no way top-down government would benefit the country in that light. It is the ironclad ingenuity of the American people that will solve our financial problems.

2. Gold and Silver – Gold has been money for over 5,000 years. His red-haired stepsister, Silver, is also known as Money. The ratio between the two was historically 16-1. I’ve personally seen the spread go from 80 to 1 to 30 to 1 over the last year and back up to around 40 to 1. That means you can buy 40 ounces of silver for 1 ounce of gold. Thus, silver costs $35 per ounce and gold $1,500 per ounce. Now – reality check. Warren Buffett does not invest in gold. If you’ve been following any of my book summaries, you know I’m a Buffett fan, so let’s check it out. Basically, Buffett is saying that if he owned all the gold in the world, he would have a 67-foot cube of gold (height, width, length for you if you start math). He could polish it and kiss it and sleep on it. Instead of the gold cube, he could have half the farmland in the US plus 7 Exxon Mobiles plus a trillion dollars in cash. He would rather take the latter as I do. Basically, Buffett argues that gold has NO USE. I agree with him. Silver on the hand is different. Buffett has owned silver in the past and could still own some. Silver has utility as it is used in cell phones, computers, smart devices, and medical devices. That’s why I love silver as a savings tool.

3. Cash Flow vs. Capital Gains – We don’t want to fall into the big fool theory of investing in capital gains. Well, in truly contradictory ways, silver is a capital gains investment. Either way, you need to take a synergistic approach to all of your investments. That means we want investments to spit cash flow, but we also want our savings to grow. Robert Kiyosaki states that savers are losers. Translated, this means that if you hold dollars, you will lose out due to inflation and currency debasement. Thus, you can keep your savings in silver.

Now let’s talk about holding “real money” as a lifesaver. Note: Do your research, I’m not saying go out and invest in silver and gold today. I say educate yourself. I personally invest in silver and will continue to do so, but it is very volatile so you need to educate yourself. Also, I’m not a financial planner and don’t give advice, so please do your own homework. My goal is to simply help you with this homework.

1. Mountain of Debt – This book was written in 2007 BEFORE the subprime crash. Even then, the USA was stuck in a mountain of debt. Since then, the Fed has TRIPLED the money supply. So that mountain just became Mount Everest. This has happened in the last 3 years and that is why the dollar is at an all time low in 2011.

2. Unfunded liabilities – Social Security, Medicare, Medicaid……… These unfunded liabilities along with the mountain of debt only compound the problem. If you give someone something and then try to take it away, all hell breaks loose. Check out GM. They had to go bankrupt, get government bailouts, and pay off all their unfunded debt to survive. They’re doing pretty well now, but the little guy lost his pension and medical care. Find out, my friends. Don’t let other people manage your money… The same will happen to the US with bad debt. Start planning NOW.

3. Derivatives – We’ve touched on this before, but in short, here’s what happened in the subprime crisis. Around 100 people sat in rooms and decided to sell MBS (Mortgage Backed Securities) to investors. Trouble was, they bagged crap, sprayed it with perfume, and sold it as triple-A rated instruments. The rating agencies and the management of these companies should be prosecuted. What happened was that a 1-2% price move could wipe out the companies because the leverage was so low. These guys wagered billions to make tens of millions. There are too many zeros for this to work in the long run. As we now know, that was not the case.

In summary, what does it all mean? This book and books like it will help you take charge of your own destiny. It is recommended to keep 10% of your wealth outside of the financial system. This means there is no counterparty risk. If you put all your money in the bank and there is a run on the bank and it fails, the bank is the counterparty. Holding physical gold and silver as real money eliminates counterparty risk.

I hope you found this brief summary useful. The key to any new idea is to incorporate it into your everyday life until it becomes a habit. Habits are formed in just 21 days.

One thing to take away from this book is EDUCATE YOURSELF. Please open your eyes and spend a few minutes each day educating yourself. You’ll be glad you did.