Do you think that the U.S. dollar is as good as gold? Think again. The dollar has not been backed by gold since 1971 when Nixon shut the gold window and formally took the dollar off of the gold standard.

Why did he do it? Because the Federal Reserve was printing so much money that the value of the dollar was falling against the price of gold and foreign governments could redeem their dollars, which we were sending overseas, for gold.

The value of the dollar has dropped over 95% since 1913. That drop has accelerated in recent years due to the increase in the amount of currency in circulation. Want proof? Look at the price of gold and oil. With the price of oil hovering around $100 a barrel, we are assured of higher gas prices this spring and summer. And this week gold hit an all time high.

If you price oil in gold, you will find that oil currently costs the equivalent of 1/8 of an ounce of gold. Just about exactly what it cost in 2001. If the dollar is still as good as gold, oil would cost us around $30 a barrel, the same price that we paid in 2001.

And what about home prices? If we priced homes in gold instead of dollars, the American home would be cheaper today than five years ago. Same thing with medical costs, food costs, just about anything that you buy on a regular basis.

So, what is the point of all of this? It is simply this. The U.S. dollar is pretend money. It is kind of like Monopoly money, once the game is over, neither have any value.

Only real money holds its value. With real money, you can purchase real things at real prices, not inflated prices. Gold happens to be an example of real money. It has intrinsic value, not implied value. That means that no matter what governments do, gold still has value.

Gold also does a good job of telling us the health of the U.S. dollar or any other currency and right now the dollar is sick, very sick.

What can we as investors do to protect our assets in light of the dollar’s health problems? We can make sure that our investments are properly diversified. By diversified I mean invested in non-correlated assets. Instead of investing in regular mutual funds which have high expense costs and limited investment options, you might consider Exchange Traded Funds (ETFs).

ETFs offer you the ability to invest in natural resources, precious metals, energy, foreign currencies, and just about any market sector that you can think of and they have very low expense ratios. They are a great way to properly diversify your investments.