Maintaining Liquidity and Investing in Gold or Silver: What You Need to Know

Navigating Currency Decline and the Potential for Government Response

Are you concerned about the declining purchasing power of your currency? Are you trying to maintain cash liquidity but also want to take advantage of investment opportunities when they present themselves? If so, you are not alone. In this article, we will discuss some important tips to help you maintain liquidity and potentially increase your investment portfolio.

First and foremost, it is essential to maintain liquidity. According to Rick Rule, "you need to maintain U.S dollar on liquidity if you live in the United States but you need to maintain it in short-term durations." This means avoiding long-term investments that tie up your money for several years. Instead, consider setting up a treasury direct account, which allows you to lend your money directly to the U.S government in maturities of less than a year.

It's also important to note that if you're not invested in physical gold or silver, now may be the time to do so. This is especially true if you have concerns about the response of the Federal Reserve to problems in the banking system. If the Fed increases quantitative easing, which is essentially government speak for counterfeiting, it will likely lead to a decrease in the value of existing currency units. This scenario could be tailor-made for the precious metals market.

One way to evaluate the competition for gold and silver is to compare it to the U.S 10-year Treasury, which pays you a little bit less than four percent in a currency that the government acknowledges is losing seven percent of its purchasing power compounded. In other words, if you lend the government money for 10 years, they promise to reduce your spending power by three percent a year compounded for 10 years.

If the real yield continues to decline, which means there are declining nominal interest rates in the face of continued inflation, disintermediation could occur. This fancy term means the selling and redeployment of assets to other investments, including gold and silver. Therefore, this is an ideal time to increase your allocation to gold and silver, particularly at the expense of bond holdings or savings products that have durations longer than two years.

In conclusion, maintaining liquidity is crucial, and investing in gold or silver could help protect your portfolio against inflation and a potential decrease in the value of currency units. By following these tips, you can maintain cash liquidity while potentially increasing your investment portfolio.