Following losses on Friday, stock markets around the world headed south again today.
Stocks plunged in Asia and Europe overnight.
And in the U.S. the S&P 500 plunged 3%, its worst single-day loss since December 2018.
Gold and bitcoin are surging.
As stocks tumbled today, bitcoin is up 8%. And gold is up 1.5%.
As I (Chris) will show you in today’s dispatch, it’s all down to the rush into “honest money” we’ve been writing about.
On Friday, President Trump escalated his trade war against China.
He threatened to slap a 10% tariff on $300 billion of Chinese imports.
China didn’t take the threat sitting down. But it didn’t respond with a tit-for-tat tariff either.
It struck back using its currency, the yuan.
The Chinese central bank pushed down the yuan to its weakest level versus the dollar since 2008.
This is supposed to make Chinese exports more competitive. But it robs buying power from Chinese consumers.
But here’s the thing…
The Chinese feds aren’t the only ones that want to devalue their currency.
The European Central Bank says it wants a weaker euro. After all, European Union exporters also want a competitive edge.
And President Trump has warned that the U.S. can play the same game… and devalue the dollar in retaliation.
In short, currency wars are like trade wars – they’re tit for tat.
One country devalues its currency to boost its exports. But this ignites beggar-thy-neighbor rounds of devaluations from its rivals.
That leaves holders of these currencies with less buying power. You still have the same number of dollars in your account. But they now buy less stuff.
This is what happened during the Great Depression… and it didn’t end well.
Countries devalued their currencies to gain export market share. But each devaluation triggered retaliatory devaluations by their rivals.
The result? A race to the bottom for government currencies… with no country gaining a relative advantage.
And that’s what’s in the cards again today.
As you’ll recall, honest money is money governments can’t fiddle with. That makes it fundamentally different from the “fake money” the feds issue. Bill…
In 1971, we started on this fake dollar standard. That’s when the feds cut off the dollar from gold. And gold is what connected the dollar to the real world of limitations.
Now, we’re seeing the return of honest money. We already know gold is honest. But I think bitcoin – where the supply is limited by an algorithm – is a reaction to the fake dollar standard, too.
It’s why here at Legacy Research, we’ve been recommending you hold both bitcoin and gold.
Some prefer the kind of honest money you can stub a toe on, like gold and silver. Others prefer the ease of use of the electronic kind of honest money, bitcoin.
But there’s nothing stopping you from owning both gold and bitcoin.
In fact, the two are complementary. Here’s how colleague Nick Giambruno explained it to our Casey Report readers…
Bitcoin is no substitute for physical gold, nor is it a threat to gold’s value. I still think gold is the best way to preserve wealth over the long term.
But both are tools for advancing your financial freedom. In fact, I think of bitcoin as a “gateway drug” to gold. It gets people to think about the nature of money, something only few would otherwise do.
Once they take a closer look, many see the destructive nature of government currencies and central banks. That inevitably leads them to gold.
And world-renowned crypto investing expert Teeka Tiwari agrees…
Some investors may opt to buy gold to shelter their wealth. And I do recommend owning some gold. It’s the safest and most secure way to protect the value of your money.
But it’s not very convenient. You can’t just break off a piece of gold and anonymously go buy something with it. When you’re ready to buy something, you’ll need to convert your gold into some other form of currency.
But like cash, bitcoin and other cryptocurrencies are liquid. You can easily send them anywhere in the world from an app on your phone for very low fees. Best yet, when you use digital currencies, you enjoy a high degree of anonymity. So your financial privacy is secure.
If you’ve never bought bitcoin before, check out this simple, one-page guide Teeka’s team put together.
It shows you the three exchanges they recommend to buy bitcoin… four secure digital “wallets” you can use to store your bitcoin… and where you can trade it for other cryptos.
And if you’re looking to buy gold, check out The Gold Book.
It’s 48 pages filled with everything you need to get started as a gold investor – including a four-step checklist for buying the right coins… flexible storage options… and what to look for in a gold stock.
Regards,
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Chris Lowe
Dublin, Ireland
August 5, 2019