The political and economic crisis in Kiev could be a precursor to the growing unrest with government agendas. And the Ukraine is not alone. Egypt, Syria and Venezuela have all stood on the brink of civil war in the last year and the decline of the Argentinean peso could spark a public rebellion at any moment.
Social turmoil of course has economic consequences, and in times of financial downturns precious metals are one of the few options investors have to secure their financial position in times of economic uncertainty.
In Ukraine the banks have downgraded their credit limits and have tightened capital control. ATM’s are not filled with sufficient funds for everybody to get access to money and the Ukrainian hryvnia has depreciated by 5 per cent since the turn of the year.
Investors in physical gold
In times of social unrest, people need to sell their assets in order to raise money for food. A drop in currency will lead to a thriving black market of US dollars and Euros, but only by selling your gold and silver will you get a good return for your investment.
Even recent history shows us that Ukraine is not an isolated event. When the banking system crashed in Argentina in 2001, bank account owners could not get access to their money. Just a couple of years ago, Cypriots with more than €100,000 in their bank accounts were ordered to use their life savings to contribute towards the bank bailout.
In Argentina, people lost so much faith in the banking system they would queue up outside banks on pay day to withdraw all their money from the bank and invest it in commodities and physical assets. That was until 2012 when the government brought in a law that restricts the amount of money an account owner can withdraw at any one time.
Residents in Ukraine are confronted with the same problem and only people with physical gold or other material assets they can sell will have access to money. And like in Cyprus, if the banks default on their debts bank depositors with more than a set amount in the accounts will have part of their saving confiscated.
Investing in precious metals
It is an unthinkable thought, but if the credit problem that is being created by governments and central banks escalates out of hand, we could find the events that are currently happening in Kiev become widespread around the world.
And bank account owners in advanced economies where the cost of living is considerably higher have more to lose.
Given the way the credit-riddled economy is headed, it makes perfect sense to invest in safe-haven commodity such as gold or silver. The precious metals market always performs well in times of financial strife – and a credit crash will be even more devastating than the 2008 banking crisis.
It seems inevitable that banks will require bailouts again in the not too distant future, therefore if you have a reasonable amount of savings stashed away for retirement, invest it in a commodity like gold and silver that will land you high net returns when credit ceilings eventually collapse.