For those of us who seek to protect our wealth when planning for retirement, there is one fact that we dare not ignore.
The currencies of the world, whether made digitally or printed, are all losing value. They don’t purchase the same amount of goods and services this year that they did last year.
That means that these currencies aren’t acceptable tools of wealth preservation.
When governments report inflation figures, they are actually reporting the rate at which their currencies are losing purchasing power. The experience of generations shows that one can expect governments to understate these losses.
Here are some representative inflation rates:
- Japan – 1.2%
- China – 1.5%
- France – 4.5%
- Germany – 7.3%
- America – 8.5%
- Argentina – 55%
- Turkey – 61%
Central banks everywhere are engaged in the same corruption, just at different rates.
The average American household must spend $5,200 more this year to acquire the same goods and services it purchased last year.
The Federal Reserve is at last feeling the heat of public discontent over rising prices. Fed Chairman Jerome Powell has ping-ponged from inflation hawk to dove to hawk once again.
It’s clear that the Fed knows that the impact of a planned interest rate increase on the American people will be profound. That explains why it has been dragging its feet on instituting a higher rate regime for months.
It doesn’t relish the fallout when it drains liquidity from the markets. The price of many companies’ shares will go the way of Netflix when the Fed’s bubble is pricked.
But it’s also clear that runaway inflation threatens social order and prosperity. The Fed apparently feels that with the highest inflation in 40 years, its own time is running out.
Now the central bank is vowing to raise rates even at the cost of a severe recession, including widely predicted stock and bond market collapses.
Bear in mind a pattern we’ve identified over and over. Suddenly faced with margin calls for their leveraged stock positions, Wall Street traders and hedge funds liquidate assets with perfectly sound economic fundamentals to meet margin calls in collapsing markets. In 2020, as the pandemic panic grew, Wall Street professionals, scrambling for cash to meet margin calls, took profits in gold, the most liquid commodity of all.
They turned to gold for the liquidity they needed in the moment, but it was a brief affair, and they wasted no time reestablishing their gold holdings.
This is, to us, a familiar pattern. In the fall of 2008, during the stock market carnage of banks closing and the popping of the housing bubble, gold fell hard.
Of course, it didn’t last long. Soon, gold was racing to new all-time highs. Three years later, it had risen by more than two and a half times its October 2008 low.
That’s why we urge our friends and clients to take advantage of the Fed’s policy pivot and add to their gold holdings. Any dip in prices is likely to be short-lived.
Author and gold commentator Jim Rickards points out that the Fed’s interest rates are so far below the inflation rate that only drastic, economy-killing rate hikes will be enough to bring inflation under control.
“Powell’s rate hike plan is intended to squash inflation currently running at over 8.5%. Powell’s problem is that in order to squash 8% inflation, he would have to raise rates to 10% in order to achieve a real rate of 2%. But, there’s no way Powell could get rates to 10% without a massive recession and market crash. The market will probably crash before rates get to 5%, let alone 10%. The faster Powell raises rates, the sooner the crash will come.“
What can central banks do to restore the dependability of their currencies? They’ll have to turn to gold, the world’s currency par excellence. That day is approaching fast.
The value of the gold you acquire now will skyrocket as fiat money continues to fail and the world reembraces real money.
Let us provide you with a free one-on-one consultation.
The opinions, beliefs, and viewpoints expressed in this article do not necessarily reflect the opinions, beliefs, and viewpoints of Red Rock Secured LLC or the official policies of Red Rock Secured LLC. Red Rock Secured LLC is not a financial advisor, is not licensed to provide investment advice and neither provides investment nor financial advice. Red Rock is a product specialist that can help evaluate your precious metals purchase options.