| Today, I want to tell you about one of my greatest interests. It's a topic that I regularly feature in Midas Letter, as it speaks to the heart of my long-term market approach and the direction that I see the world heading in.
I also believe that it will inevitably lead to one of the greatest investment opportunities we'll see in our lifetimes … at least, for those of us who start preparing for it now.
I'm talking about global fiat currencies.
When you've lived through a period of relatively stable currency regimes, it becomes difficult to imagine how the global financial system could go through a relatively large shakeup — especially to the point of it failing.
But the thing is, fiat currencies have crumbled time and again throughout history. And the reason is always the same: Governments are incapable of resisting the urge to gain popularity by printing too much money.
Today, we call this excessive money-printing quantitative easing, which is basically when governments print fabricated money out of thin air with absolutely no financial backing.
In the short term, quantitative easing feels like a great thing because it elevates everyone's standard of living to some degree.
But over the long term, too much liquidity drives down asset prices to the point that they're no longer valuable, and until nobody has any confidence in them as a unit of trade.
This cycle of currency debasement has continued uninterrupted for literally thousands of years. And it's happening again right now.
Thanks to the coronavirus, central banks around the world started printing more money than ever before in human history. Euros, yen, renminbi, pounds, pesos and especially dollars have been conjured into existence by the mere flourish of a signature.
This isn't an entirely new concept, but the unprecedented level of quantitative easing — in the form of trillion-dollar stimulus packages — is simply mind boggling.
And it begs the question when, not if, will our currencies begin to fail?
You see, when the currency of a nation begins to multiply exponentially as a result of excess debt, the currency reaches a point where it's at the brink of collapse.
This is called "hyperinflation," and it's been the precursor to every single fiat currency's downfall throughout history. I bring this up because I believe the U.S. dollar, among others, is rocketing toward full-fledged hyperinflation as we speak.
And when the dollar does eventually crash, the government will scramble to acquire the one reliable source of value since the beginning of time…
Gold.
This precious metal is the one unit of value that investors can take shelter in when fiat currencies start to fall, and inflation runs rampant. That's because gold is a physical, tangible asset that has value in and of itself.
Gold's supply is also limited to the amount of it that's dug up from the ground. And when all of the gold in the world has eventually been mined, that will be the end of it. Those who have gold will see its value soar … and those who don't will be left to fight for the scraps of any currency that's left.
Long-term investors understand this delicate balance and flock to gold when times get tough. It's why we saw the metal's value pop in 2020 right after the coronavirus hit, and why it continues to be a good hedge against the threat of rising inflation.
But I believe that this is only the beginning of what will be the inevitable downfall of the dollar, and other paper currencies like it.
There's always the chance that global central banks could pull some as-yet-unknown monetary rabbit out of a hat, but I say the chances of that are slim to none. And that's why I believe we're about to witness a new bull market in gold over the next several years.
It's also one of the reasons I moved to a farm in Canada and started becoming more self-sufficient, which I told you about yesterday.
(By the way, don't be fooled by the argument that you can't buy a loaf of bread with gold. I used it to buy my entire farm, and now bake bread from organically grown wheat on my own property whenever I want.)
So, the next time somebody tells you that gold is outdated — or better yet, obsolete — feel free to bob your head in enthusiastic agreement and then offer to buy whatever physical gold they have at a discount.
It might just save your portfolio … and set you up for a nice windfall when the gold bull market really gets underway.
I'll have plenty more to say about gold and the alternative ways you can invest in it over the coming weeks. So, be sure to keep an eye on your inbox for more of my ongoing tips and investment opportunities.
James West
Midas Letter
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