[Inflation] is turning the perception of the Fed from the world’s most powerful central bank, long respected for its ability to anchor global financial stability, to an institution that too closely resembles an emerging-market bank that lacks credibility and inadvertently contributes to undue volatility – Mohamed El-Erian
By now, most people know that inflation makes things cost more. But fewer realize that, in general, higher prices reflect the deteriorating purchasing power of the dollar.
It’s vital for those seeking wealth protection and hoping for a secure retirement to realize that inflation lowers the value of pensions, savings, and all bonds and Treasury notes.
Today, investors are focused on the trainwreck in the stock and cryptocurrency markets. They have lost trillions of dollars in cryptocurrencies and have lost trillions more in the stock market.
“The selloff has erased nearly $3 trillion from U.S. retirement accounts, according to Alicia Munnell, director of the Center for Retirement Research at Boston College. By her calculations, 401(k) plan participants have lost about $1.4 trillion from their accounts since the end of 2021. People with IRAs — most of which are 401(k) rollovers — have lost $2 trillion this year….
Among workers with 401(k)s, those with annual incomes under $30,000 a year had 81% of their retirement fund in stocks, while for those making over $150,000, the figure was 76%.”
Many economists seem satisfied to investigate inflation’s immediate impact on today’s prices, consumer spending, business investments, and employment rates.
But what other damage does inflation do to society that you need to be aware of?
Inflation’s effects are so destructive to the long-term resilience of the economy that wise investors must protect themselves from more than just the diminishing purchasing power of the dollar. They must protect themselves from the undermining of our future national prosperity, which, in a vicious cycle, can prolong and intensify inflation.
Let’s list some of inflation’s knock-on effects:
- Inflation shortens people’s time horizons. When inflation makes savings unrewarding, the future will arrive unprepared for. This is a deadly financial explosive, as it grows the dependency classes.
- Inflation undermines trust in the state and erodes civic comity; social cohesion frays. Those with superior insight into future economic conditions take advantage of the less informed. The shrewd prey upon the naive. People everywhere enter into financial agreements in the hopes of meeting their obligations in currency of radically altered value.
- Inflation encourages debt. It encourages speculation and decapitalizes individuals, families, businesses, and entire nations.
- Inflation can radically diminish economic growth. Besides undermining capital formation, it shifts the entrepreneur’s focus to financial engineering, inventory management, and cash management. All of those are important functions in any environment, but an inflationary regime subordinates the creative and innovation functions of dynamic businesses.
- Inflation is especially harmful to the retired and elderly. At a time in life in which their investing should minimize risk and speculation, they are imperiled by turning to inappropriately speculative and leveraged investments in a desperate attempt to keep up with inflation.
You will note that much of the foregoing means an economy of instability, of more danger and less opportunity, one that ultimately resembles a third-world country. The point is that while most people focus on the rate of inflation—rising prices and evaporating purchasing power. Unseen, like termites eating away at the foundation, are inflation’s other impoverishing consequences. This underscores the imperative for the wise investor to secure his personal wealth with gold and silver, to eliminate counterparty risk with the world’s only monetary/financial assets that are no one else’s liability.
Gold and silver’s value endures despite the chaos and wealth destruction of inflationary governments and inflationary times. When a hurricane is coming, it’s a good idea to seek shelter from the storm.
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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.