ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Household Investment Technique II: The Personal Pyramid II Plan

Updated on August 17, 2019
My Esoteric profile image

My Esoteric spent 20+ years as a DoD Cost and Economic Analyst as well as a program manager of the Air Force Total Cost of Ownership MIS.

What is Hyperinflation?

THIS HUB OFFERS A SLIGHT ADAPTION TO THE BASIC Investment Pyramid in order to provide protection against something that probably will never happen. But, like all insurance policies, you grouse about paying for it but are very happy you need it.

What you are insuring against is hyperinflation, runaway inflation when an economy is collapsing and it's currency is becoming worthless. It really hasn't happened in America, yet, but it has happened in economies of such countries Germany and Argentina. When this happens, people look toward something solid, something that holds it's value over time, that something is Gold.

Gold has been a time-honored form of currency since forever. It sill is today in many countries. It isn't a legal currency in America today, but, I just heard Ron Paul, US Representative from Texas, declare he is determined to get America back on the Gold Standard once again. Nevertheless, whether gold is legal tender in American or not, it has value and can be treated that way.

The reason you would want to add gold to your investment pyramid is because when people get scared about an economy, the value of gold goes up. When the economy crashes, the price of gold goes WAY up.

Price of Gold Over 38 Years
Price of Gold Over 38 Years | Source

Why Gold?

BECAUSE when people believe an economy is in trouble, the price of gold goes up. When an economy crashes, the price of gold goes WAY up, relative to the currency of that economy. Besides gold's historic use as a currency, it is more available than more precious materials such as diamonds or platinum.

Take a look at the chart to the right. What you see is a 36-year history of the price of gold from 1973 to 2010. The first spike at around 1975 is the result of the 1973-1974 oil embargo and the world-wide economic turmoil that caused. The next major spike in gold prices in 1980 is probably the closest thing we have seen to hyperinflation in a long time. It wasn't because the economy was collapsing but skyrocketing oil prices driven by other external reasons, resulting in inflation of everything make with oil. All of this led to the recession of 1980.

Starting in 2003, we see the beginning of the biggest run-up in gold prices in history and it hasn't stopped yet. It begins with the economic instability driven by:

  1. First, the aftermath of 9/11,
  2. Second,the ramp-up of the war in Afghanistan,
  3. Third, change from budget surplus to deficit brought on by the Bush tax cut
  4. Fourth, the huge turmoil and uncertainty from start of the Iraq war compounded by the sloppy execution of the war in Iraq and Afghanistan.

That gets us to 2007, where prices flattened out briefly, but only briefly. That was the beginning stages of America's almost fatal economic collapse. You can easily see that as things really started to go to hell-in-a-hand-basket, the price of gold soared; it is still soaring. Can you imagine where the price of gold would be if, first, President Bush hadn't gone against his core ideological principals and agreed to TARP and, then, if President Obama had listened to the ney-sayers and not gone forward with the stimulus? How about, oh I don't know, $3,000 an ounce rather than the current $1,400 or so an ounce; $4,000?

In any case, I think you can see how economic instability is related the price of gold.

Changing Pyramid I to Pyramid II

THE CHANGE WE WANT TO MAKE TO Pyramid I is to add a block at the bottom for the acquisition of gold. This is shown in Figure 1 below. The recommendation is that you put 1% of your investment in gold. That 1% comes from the Money Market block. All of the rules about when you fund this part are the same as they are in "Household Investment Technique of the Month - Nov: The Pyramid I ": There is only one caveat regarding the acquisition of gold for this purpose, buy real gold, either bullion, coins, or other hard metal. Don't buy bonds or stocks or other paper instruments, buy the real deal. You don't need to personally hold it, although that might be fun. You can have a third party store in for you for a fee. Personally, I don't own any gold beyond a 1oz $50 gold coin from the US Mint, 2 - 0.1 oz gold coins, and a 2 gram "bar" I bought out of a gold dispenser at the Golden Nugget casino because I think they look cool. But, even with that little bit, what if we go into a depression some day and gold hits $10,000/oz? Hmmm.

Investment Pyramid with Protection Against Hyperinflation

Post Script

WHILE I DO OWN a little bit of gold (primarily a $50 gold piece my employees gave me for my 60th birthday), I haven't followed my own advice; but that doesn't mean you shouldn't, therefore. I do not in any way have 1% of my investment assests in gold; and I am much poorer for it! When I knew to do this, gold was $300 an ounce; you know the rest of the story.

I Am Just Wondering

Would You Find Investment Pyramids I or II Useful for Your Investment Plan?

See results

Demographic Survey #1

Are You

See results

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

Show Details
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)