John Aziz of azizonomics.com recently wrote a post about how the centralization of the global economy puts us all at risk.
Here is a quote from his post:
“Centralisation concentrates decision-making. Centralisation acts as a transmission mechanism to transmit and amplify the effects of centralised decisions throughout a system. This means that when bad decisions are bad — as inevitably happens in economics — the entire system will be damaged. Under a decentralised system, there is no such problem. Under a decentralised heterogeneous system, mistakes are not so easily transmitted or amplified. Centralisation is fragile.”
In other words, when every part of the world economy is connected, a mistake made in one place can ripple out and impact people in every country.
He cites Switzerland as an example of a decentralized economy. Not only is Switzerland not part of the European Union, but the decision-making apparatus within the country is also decentralized.
But what does hold true is that the decisions made by our employers, various levels of government and financial institutions ripple down and affect every aspect of our lives. This is particular true when, like on the global stage, these entities make mistakes.
We are vulnerable because our means to survive and prosper as individuals have become too centralized. We depend utterly on our employer, different levels of government and the financial institutions that manage our money and our savings.
We are too dependent. The failure of an employer, mismanagement by government, or dishonesty at our banks are transmitted and amplified down to our level, and can put us out on the street in a heartbeat.
To address this vulnerability, we have to wean ourselves off the convenience of the centralized dependency we “enjoy”.
This means creating secondary sources of income for ourselves, so we are less vulnerable to “downsizing” by our employer. It means choosing not to depend on any handouts from any level of government. It means diversifying our financial holdings, so that the failure of any one institution has only minimal impact on our wealth.
It’s easy to be dependent, and convenient to be part of a centralized system. But it leaves us hugely vulnerable.
Owning gold won’t address the issues of expanding your sources of income, or weaning yourself off government handouts, but it will help protect at least some of your wealth in the event of failure or dishonesty at whichever firm manages your investments and pension.
When you buy and own physical gold, you are taking a step towards decentralizing your wealth. Physical gold is an asset and currency that is yours, under your own roof.
It’s one step on the road to reducing our centralized dependency.
About the author: DH Kenrick is a student of world economics and a committed gold enthusiast. Follow me on Google+
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