When we acknowledge that we’re being robbed of our well-earned savings by dilution, it’s time to take measures to escape the “road to serfdom”. What about a traditional savings account where you get interest? Well, sounds like a safe and prudent place to put your money, but for it to even be considered you better get a return on your money that at least compensates for inflation. Let’s say you get lucky and earn a yearly 3% yield in your savings account. You’ll be just fine as long as the annual living expenses increase less than those 3%. So is that the case? Here’s a chart, courtesy of Casey Research that includes many of the basic goods we need – from oil and gasoline to wheat and cotton.
Does it look like prices go up less than 3% per year? If “Yay, the prices only go up 1,1%!” is your reply, you should definitely put all your assets in a bank account, go back to sleep and stop reading this blog right away! For the rest of you who feel that the annual inflation according to the Bureau of Labor Statistics’ (BLS) Consumer Price Index (CPI) is sketchy to say the least, please keep on reading. As you can see, the prices year after year were exploding by the second half of last year, and this is a process that is likely to accelerate since there’s been hundreds of billions of dollars pumped into the system since then.
So if we can’t stay in cash or put them in the bank account, how about Treasuries? Unless you buy Greek, Irish or other debt where default is inevitable you won’t get nearly enough yield to compensate for inflation. No one in their right mind should even consider lending to most of the governments when practically all their balance sheets look like a horror movie script.
Then how about real estate? The biggest real estate bubble in history has just started to burst, and we’re nowhere near the bottom in most areas. Maybe in a few years, but not now.
Stocks are a traditional inflation hedge and even though the general stock markets look overvalued from a fundamental perspective they might offer some protection when inflation really ramps up. When people want to dump their money the stock market is one of the easiest way to do so and therefore even Zimbabwe’s stock market functioned as a safe haven during their recent hyperinflation . In order to gain a real return on your investments though, you need to handpick your shares and have a good idea of what you’re doing.
Commodities are a good way to play it, and if you can pick solid companies that produce raw materials, oil or food that are likely to go up a lot in price in the coming years, then they may give you a nice profit. At the same time, economic hardships tend to lower the demand for oil, copper, etc. which will work as a counterweight. Another hassle is that it can be troublesome or inconvenient to store 100 barrels of oil, a few tons of copper or a shitload of food, not to mention that most food will go bad.
There is one place to be though, that will benefit both from the eroding currencies and a slumping economy, while it’s easily storable and (for now) attainable: precious metals.
silver and gold bars
Gold and silver have been considered money for thousands of years and have always been the place of refuge during uncertainties in the past. When people lose trust in politicians and the paper provided by central banksters they chose the safe haven that gold and silver provide time and time again. The precious metals need to be dug out from the ground which is a long and difficult process and therefore cannot be diluted by a printing press or a click on a computer screen. They are durable, retain their value over time, are universally accepted and divisable where every unit of weight is worth the same. These days its even possible to buy gold and silver and store it in your retirement account. But, its wise to read a gold IRA review of each company before choosing one. An extra bonus is that they are beautiful, which is why gold and silver jewelry have been popular since the metals were first discovered. To sum it up: gold and silver are pretty much everything that paper currencies aren’t. The only thing paper money still has – universal acceptance – is about to change.
So there you go. If you don’t own any today, start accumulating physical gold and silver ASAP. That’s the only safe haven in these times. Leverage but also risk can be found in quality miners, but I’ll mention more about that in another entry.