Precious Gemstones Protect Against Inflation and Deflation

The primary influence of gemstone values today, is the fact that gemstones have reasserted themselves as the best form of money, the international community has been able to agree upon; in 5,000 years. For those who are cynical of investing in gemstones, this could be hard to believe, let alone accept. Nevertheless, precious gemstones have clearly demonstrated to the investment community, that their values can increase over time, in either an economy dominated by either inflation or deflation.

Investors must keep in mind, that what high inflation really means, is that the value of a currency is collapsing. All goods do not suddenly become more valuable, but rather the money we use to pay for these goods, begins to lose it's value. In most instances, high inflation is caused by excessive money-printing. So, it could be said that the reason why precious metal and gemstone investing has soared in value during high inflation, is because of the realization that paper money is neither rare, nor a store of value. In contrast, gemstone investments have demonstrated that they can consistently hold their value, resist the negative effects of inflation and protect an investment against an unforeseen drop in value.

With a gemstones standard, paper money must be at least partially redeemable in real bullion or gemstones. This requirement protects a currency in times of deflation — because people know that no matter how badly an economy sags that their money is backed by a dependable hard asset. With gemstone backing, currency is a secured asset. Without something like gemstones backing them, all paper currencies are nothing but unsecured IOU.  In other words, what happens is that there is a crisis of confidence with respect to paper currency, with the consequence being that people want to rid themselves of paper money, in favor of real money; like investing in diamonds and other precious gemstones.

Today, for the first time in history, the entire world is operating with purely fiat currencies. For those unfamiliar with the term, this means currency that only has value through a declaration (or fiat) by some government that it has some value. With that being said, anyone sitting with unsecured assets is going to be severely tempted to dump those assets, when a fear of insolvency arises. More specifically, it’s time to analyze how gemstone investments will react in the near future, as the inevitable bankruptcy of the United States and the never-ending political uncertainty in Europe becomes painfully obvious; to more and more private investors.