Take it from “Dr. Doom”: own some physical gold and keep it out of the banking system.
Dr. Marc Faber, a legendary investor and the editor/publisher of the Gloom, Boom & Doom Report, is well known for his contrarian investing style.
In a recent Metal Masters interview with the Hard Assets Alliance, he noted that the biggest geopolitical risk for Americans today is not a conventional war but rather cyber-attacks that could take down the US power grid.
In such a scenario, gold would become an irreplaceable medium of exchange. But it’s not the only reason to own gold today.
Diversified Assets Outside the Banking System
Faber grew up in Switzerland right after World War II, a tough time that caused his family to distrust paper money and taught him the importance of precious metals as a safety net.
Faber remembers how his father talked about rich people as millionaires.
“That, in the ‘50s and ‘60s and ‘70s, was a lot of money. Today, a million is nothing at all—small change. Unfortunately. When people talk about, ‘Oh, there is no inflation in the system,’ this is nonsense. Compared to assets, money has lost a tremendous amount of purchasing power.”
After working on Wall Street for over two decades, Faber’s assets consisted mainly of bonds, equities, and real estate. He says it was in the 1990s when he realized that “it’s good to have a diversified asset outside the banking system and not financially related” and began to purchase some physical gold every month.
The Fed largely ignores gold as an asset, he says, because “gold is an embarrassment to central banks.”
When the Lights Go Out, Bitcoin Goes Too
Regarding a possible war, Faber believes it’s unlikely that anyone will ever invade China or the United States. He thinks the true vulnerability lies in “wars that are fought not with tanks—they are fought by, say, somebody could switch off the light in New York, or the electricity, or the Internet. If you switched off the Internet, what would happen?”
This is where the merits of gold bullion become obvious, he says: “In these times, you actually want to have access to something physical that is a recognized medium of exchange.”
“Gold Is Driven by Money Printing”
When the Fed pursues loose monetary policies, Faber states, the people who benefit the most are the super-elite, the 0.01%. They have been moving ahead while the average American suffers:
“50% of American people have no assets. … They don’t benefit from money printing. Actually, they’re hurt because their cost of living is going up, and it’s going up more than the CPI would indicate.”
He believes “that the recovery, globally, is very weak” and the rapidly growing unfunded liabilities are a clear threat that could lead to another financial collapse.
“By being in equities and by being in gold, and also having some exposure to bonds, you have some diversification,” he says.
“Then you can hope when the hour of truth occurs, you will only lose, say, 50% of your assets, but your neighbor loses everything. So relatively speaking, you will have done very well.”