Wealth Protection: Two Cautionary Tales From France And The American South

May 15, 2017

On May 7, Marine Le Pen's defeat in France's presidential election secured an integrated EU and had many investors breathing a sigh of relief.

Had the election gone her way, French workers could have seen the devaluation of their euro-denominated pensions if Le Pen had made good on plans to quit the currency in favor of returning to the franc.

Monetary sovereignty sounds all well and good until it claims a huge chunk of your life savings.

Currency shifts like the one France just avoided are hardly unique. Throughout history, paper currencies have come and gone, taking with them the security so many work their entire lives to achieve.

Those who successfully weather the upending of their nation’s monetary system usually have one very important protection in place: they own assets with intrinsic value that act as a long-term store of wealth.

As a historical safe-haven asset, gold has many benefits—such as portability, durability, and divisibility—that others, like real estate and certain commodities, don’t possess.

Here in the US, it’s been more than 150 years since our last major currency shift: the end of the Confederate States of America dollar. Just like today’s fiat currencies, this money was not backed by hard assets but simply by a promise to pay the bearer after the Civil War was over, on the prospect of Southern victory and independence.

If that sounds like a recipe for disaster, it was—but not for a man named George Walton Williams.

A grocer and hardware store owner in Charleston, SC, Williams was tapped by the Confederation to be a “blockade runner,” sending his ships from Charleston Harbor to England and back.

During the war, the Union Navy blockaded Charleston’s port and then attacked the city for months. The blockade runners would sneak past the Navy ships and bring necessary supplies to the city under siege.

Blockade runners made a lot of money—often tens of thousands of dollars per trip, back then a princely sum—and George Walton Williams was one of the investors and directors of those enterprises.

There was only one caveat: In return for his assistance, Williams insisted on being paid back in gold and silver.

By the end of the war, after the collapse of the southern states, Williams was one of the few businessmen whose wealth wasn’t wiped out along with the Confederate dollar. While most other people were left with nothing, Williams managed to survive and thrive.

In fact, his wealth was so great that he singlehandedly bailed out the Broad Street banks. He also built a 24,000-square-foot mansion that still stands in Charleston. It cost $200,000 to build—back in the 1860s!

The lesson here is that anyone who relies on a fiat currency for their wealth should think very hard about the strength and endurance of that currency. 

George Walton Williams was smart enough to recognize the risk inherent in the Confederate dollar. He demanded payment in gold and silver not to get rich, but to stay rich. He knew that the value of his hard assets would not evaporate in an instant the way the value of paper money can.

Today, we face different circumstances than George Walton Williams, but it’s still potentially life-saving to insure your future against falling purchasing power with gold and silver.

In the end, it’s about protecting yourself. Owning a meaningful amount of gold can help ensure that you’ll never lose it all if the world you know changes forever.

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U.S. ranks third in world gold production with 240 tons per year