Since the 2008 stock market downturn, major countries around the globe have been avoiding fiscal restraint and engaging in currency wars. Essentially, they have been trying to outdo one another in printing money to generate wealth, but really, it’s the illusion of wealth. I like the way Drummond Brodeur, Senior VP and Global Strategist of CI Investments, put it: “Without tough reforms in both the Eurozone and Japan, Quantitative Easing is just a palliative monetary drug that eases the pain of decline, but does not fix the problem.” Multiple central banks now have negative interest rates. I don’t know how this coping method will end, but it won’t end well. I believe we are slowly and steadily moving towards a global currency made up of a basket of the world’s major currencies plus a portion of gold. Canada has zero gold reserves, thereby making it weaker in a global currency crisis. The use of gold makes me think of the “shekel of the sanctuary” described in Leviticus 27:25 NIV: “Every value is to be set according to the sanctuary shekel, twenty gerahs (approx. 12 grams) to the shekel.”
God designed currency to be stable, with fixed weights and content—silver or gold. After the June 23, 2016 Brexit vote, gold spiked as investors “fled to safety.” Why? God’s design trumps man’s best. Check wisdomwithwealth.org: “Should gold be used to support a currency?”
It’s hard to tell when financial bubbles are forming, and it’s also hard to tell what will pop those bubbles, but we know the bigger the bubble—the bigger the burst! That’s one reason why it’s always important to be well diversified. The Bible gives us direction on diversification in a well-known passage on asset allocation: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth,” Ecc 11:2.
However, there is an earlier passage that indirectly refers to asset allocation. We read in Genesis 13:2 that, “Abram was very rich in livestock, in silver and in gold.” I believe we see three asset classes. Livestock is living, labour intensive, and reproducing. It also yields ongoing benefits such as milk and wool. I believe this represents all essential dividend-producing stocks in the asset class of Consumer Staples. This includes grocery store stocks such as Loblaw’s and Sobeys.
Gold represents the other investment extreme. Gold is pretty to look at, but it’s lazy. It just sits there. It pays no dividends or interest. It certainly doesn’t reproduce! Yet it is portable, sub-dividable, and internationally recognized as a store of value.
Silver, Abram’s third asset class, represents cash or short term bonds. When I was a boy, Canadian dimes and quarters were made of silver. We even had silver dollars and the waitresses at Smitty’s Pancake House, where I had my first job as a busboy, would collect their tips and pay me a portion of their “silver.”
The emergence of the bitcoin in 2008 reflects increasing and growing distrust of any and all paper-based currencies. The Bitcoin is based on peer-to-peer transactions without any intermediary. We have not seen the end of bitcoins and we should not be surprised at other heterodox man-based solutions. Quoting from CI Investments, Eric Bushell, “Unconventional policy mutates unpredictably.” We need to beware of currency devaluation, helicopter money, and rising inflation.
No matter how you store your wealth, I hope it is diversified and that you beware of making the biggest money mistake. Check wisdomwithwealth.org: “What is the biggest money mistake?” (You will need to register and login to view it.)