In most parts of the world, recession is still in effect. Countries have numerous issues with their debts, fiscal policy, public pension and other financial aspects. Because of this, we have seen numerous changes in last couple of years. Governments are trying to cut all possible costs and reinvent their economic system. Somewhere along the line, commodities became, once again, recognized as the first and most important element that allows us to establish proper value of things.
Back in the day, gold standard was used by US government. This allowed us to cover each banknote we print with appropriate value in gold. It gave entire system stability. However, as the time went by, this system was abolished. As a result, dollar lost part of its reliability. Although it is very hard to restore previous system, finances of our country still changed.
US were based on investments. Even though Dutch invented the first stock market, we were the ones that made it what it is today. We quickly realized that the best ways for companies to fund themselves is to use public money. In order to do so, they can use stocks and bonds. Stocks give us ownership of the company and right to get dividends while bonds are instruments for borrowing money. We lend money to a company and we expect that the firm will return that money with interest on future date. Now, speculation was always part of stock market. Last crisis shows us that people were going overboard with their investment. Prices were simply too high. When the bubble eventually burst, investors were left without any money. Although big investors lost most of the money, small individuals were hit the most because these instruments were resources they couldn’t afford to lose.
Have in mind that it was always hard to determine prices of stocks and bonds. As a result, investors became even more skeptical. We have seen enormous withdrawal of funds from financial markets. However, even with all loses and issues, some of us still made excess money thus, we still wanted to invest into something that made sense.
This is where commodities come into play. Unlike stocks and bonds, which are perceived as highly speculative, price of commodities, are based on real life events in the world. Austin Rare Coins review tells us that these resources can always be trusted no matter what. Also, unlike stock market which is usually connected to one geographic area, commodity markets are based on global fluctuation of prices. If government of one country starts buying off certain commodity, this means that price of said resource will instantly skyrocket. While prices of bonds and stocks are based on competition between two investors, commodity prices are based on increased use of certain resource, increased public works, new industrial trends etc.
Another positive trend that came with crisis was the fact that people started having money in gold or silver. Although these resources are harder to convert, they will always have certain value and they are not as affected by market events