Why is This Allowed?
Okay I admit it, it drives me crazy; not to the point of stopping what I am doing or raising my blood pressure, but enough to typically cause me to shake my head and comment out loud to no one in particular. I’m talking about commercials for gold and silver bars and coins. If you have watched any of the 24-hour news networks, particularly the conservative outlets, you have experienced a noticeable uptick in has-been actors hawking gold or silver. They are promoting bullion bars and coins as a hedge against inflation and suggesting that the world’s currencies, like the dollar, aren’t to be trusted; Willam DeVane says, “gold is the only currency I trust.” Whenever he says this, I always imagine taking my gold bar to the grocery store and seeing if they will accept it so I can buy food for dinner.
This shameless promotion of gold unfortunately targets the elderly, and those who fear the government, and its control of the monetary system. To be fair, the suggestion that gold and silver are a hedge against inflation is real, and has some merit, but it is a smoke screen for what they are really saying, “if you want to avoid the calamity that is coming, you better stock up with bars in your closet.”
It is important to acknowledge that gold and silver can be a hedge against inflation and have been used historically in investment portfolios at times when purchasing power is threatened. However, to claim it is foolproof and should be the preponderance of a person’s investment portfolio is generally considered to be irresponsible. Interestingly, the world’s best investor, Warren Buffet does not believe in gold as an investment. His thought is that gold doesn’t meet his test for producing anything of value; if it can’t produce anything, why own it? On the flip side, he does consider silver as creating value, specifically as an industrial metal. He once famously said, “gold doesn’t do anything, it just sits there and looks at you.”
My annoyance with these commercials doesn’t end with their fear mongering to concerned investors. I am frustrated that these ads and the companies who run them are operating independent of any government oversight or controls. Because they are selling a physical commodity and not a security, like ETFs and mutual funds, they fall outside the rules of the SEC; the result, the sale of gold and silver bullion bars and coins have no oversight. It is the wild west for these companies, and they are not shy about pushing gold and silver. Neither are they straight forward about their markups and fees associated with buying direct from them; and their markups are huge. It is like so many other scams that target unsuspecting or elderly audiences, they brand themselves as caring about their client, but they are manipulating them and selling them a product under false pretenses and, in this case, in a structure that diminishes their return potential; if you overpay for an investment at the beginning, your asset has to grow to get back to break even; and that is a problem.
If a person wants to use gold or silver to hedge against inflation, again a reasonable consideration for a portfolio, there are numerous options to enable this that are highly regulated to protect the interest of investors; there are ETF’s for virtually every commodity, and mutual funds which focus on precious metals; these investments provide full disclosure and liquidity. Nevertheless, you aren’t likely to hear about them on the mainstream networks, this is because they aren’t readily able to advertise with the freedom that the scam bullion pushers are, and so they don’t spend advertising dollars to get their message out. Besides, they could never suggest the world is coming to an end and the US dollar isn’t to be trusted. They couldn’t do it, nor would they.
I know there are people who believe, seemingly every chance they get, that the US economic system is teetering on the brink of the abyss and the world’s interconnected financial system is corrupt and failing. I know they are out there, and frankly I don’t know what to say about them. I can’t imagine living my entire life consumed by conspiracy fears and overwhelming concerns that we are going to somehow become subject to a world without economic principles beyond gold bars.
Whenever I hear people talk about pending doom or some dark version of the world they believe is coming, I step back and imagine what they are saying and what the world would look like. Honestly, I can never quite grasp the logic in how they believe we are going to get to this place they so desperately fear. That is neither here nor there, what is easier for me to imagine is how chaotic the world would be and its personal impact on all of us. What I am trying to say is, if we get to a place where I need gold to buy food, we are screwed and having ten bars of gold in my closet isn’t going to really change the narrative.
I am not a big government person; it isn’t my mindset or approach to solving problems. But government has a role, and one of those roles is to protect its citizens from nefarious actors who attempt to take advantage of us for profit. I believe the time has come for fear advertising to sell bullion bars and coins to end.
I will get off my stump, but I will leave you with this. Next time you see one of these ads just consider that somewhere out there is a grandmother who may be lonely, likely scared, worried about the future, and feeling a bit helpless to do anything about it; now consider how they must feel when someone tells them they really shouldn’t trust the dollar and inflation is going to take away their ability to pay for basic needs; but thank God, they can buy gold to protect themselves. When I personalize what these shady companies are doing it makes me mad, and it makes me sad; and even though I know the technical answer for how they get away with it, I always ask myself, “Why is this allowed?”
