The first week of September 2012, the US Federal Reserve announced one of the most radical central banking decisions in recent history. The third round of quantitative easing also known as the money printing experiment immediately opened the flood gates to $40 Billion per month or $480 Billion per year to be used by the big bankers to purchase mortgage backed securities.

This radical money printing experiment is the third round of its kind since the banking crisis of 2008 and the biggest concern is how it continues to increase the national and international pressures to create an inflationary atmosphere. A continuous flow of new money into the economy leads to inflation but since the money printed is also used abroad we can be sure that the effects of inflation will come to realization in a few years. The US currently faces high unemployment, slow economic growth and high rates of inflation as the money supply continues to increase known as stagnation. As of now, it is clear that Europe and the US will continue their reckless monetary and fiscal policies to bail out countries on the brink of default. Meanwhile countless banks, & other financial institutions along with other too big to fail companies throughout the world await their share. European central banks will keep inflating and spending like there is no tomorrow and sooner or later will have to face a global funding and currency crisis. In the U.S., it is clear that we will have to face this inflation monster sooner or later as the country continues to run budget deficits and print money through QE draws to “stimulate the economy”. So, how do you protect your assets against inflation?

Options to protect your assets:

There are two types of investments that are traditionally favored as inflation hedges; Precious metals and real estate. Inflation index securities and inflation ETFs created by the US government address the concerns that investors have in regards to inflation. It is often said that precious metals hold their value over time. An ounce of gold would
buy you a quality suit in the 1400’s and it would still buy you a very nice cabo realty quality suit today. Gold which became publicly available in the US in the 70’s, fell from $800/oz in the 80’s to about $350/oz in the late 90s. Of course, you can make money investing in gold related stocks and ETFs as gold continues to rise on inflation concerns but do you want to protect your assets against inflation or do you want to become a speculator?

Other disadvantages:

If you buy gold bullion or coins, you must store them, pay for the bank safe or safe deposit box and these costs add up to $100 – $120 per year or more depending on the size. Physical gold does not pay dividends, does not pay interest, it just sits there in a box, in a safe, in the dark and the chances of gold being stolen keeps a lot of buyers away from transacting with it on a daily basis. It is tough to justify buying bullion unless you are convinced of a doomsday scenario and it is not clear that gold will be useful as the world turns to total chaos. Just imagine having to pay for your food, medical emergency or for any other service in gold and imagine carrying your bullion around town en route to your home or safe! Real estate

By Haadi