Written by Negus Vu
I recalled Damon Dash on Breakfast Club discussing being a real boss and the importance of investment years back that sent shock waves throughout social media. It was the talk of the town, and it also displayed an array of different views on what being a employer versus being an employee is. Many aspiring entrepreneurs were embolden by Damon’s assertions on being a boss. But there were others who were highly offended by it, one notably was his statement, “Saving money is for suckas.” When I first heard him say that, I initially was offended because I valued saving money. I figured if you saved money you were ultimately displaying discipline, which in many aspects you are. But as I pondered on his statement, I began to understand what he actually meant. Of course I would have worded it differently but in essences, I understood the concept.
On August 5, 1971, the economic system changed drastically with what they called the end of the Bretton Wood system. Before 1971, money was actually a commodity where gold was its legal tender. Meaning money was backed by gold $35 per ounce Au, just imagine back then you could buy an ounce of gold for $35.00. The currency back then was at a fix exchange rate internationally. And international traders were eating up the dollar because it actually had commodity value. But just like anything else (social security, insurance) as time progressed, that system became outdated. People begin to acquired and spend more money then U.S could back with gold. There simply was a surplus of money in the U.S that was problematic for international trade & currency that conflicted with United States GDP according to President Richard Nixon and Secretary of Treasurer John Connally.
So president Nixon came up with a three step solution that he announced on August 15th which was to stop the convertibility of money to gold, and to freeze prices and wage for 90 days. In addition he added 10 percent tariffs on durable goods, meaning things of value like precious metals of such were taxed at that rate. Consequently it affected the daily operations of foreign trade and policy. European countries were infuriated by U.S independent decision and felt betrayed. Subsequently they came up with several of their own solutions in relative to the U.S one. The 1971 Smithsonian Agreement which was an foreign fixed exchange rate only lasted for a year because it was not effective. Finally the European countries changed their system to a float exchanged rate which meant the value of the dollar was based off supply and demand and not a fixed rate. To the Europeans combined their currency together to devalued the dollar of the U.S which they successfully did. So what end up happening to the value of the U.S dollar? Well, the dollar became a promissory note, it no longer was of commodity. The government was now its legal tender and credit became more popular than ever.
To put things in perspective, those people in the sixties and generations before that did not seized the opportunity to purchase gold over saving money long-term, missed out on a return of investment that would have been much more rewarding. The goal is to invest, because money over time will continue to depreciate in value where precious metals and assets usually does just the opposite. So saving money long-term is loosing money in a sense. Should you save, yes but you should not save for long-term, put your money in assets that will continuously appreciate in value.