Protect Against Inflation
History has shown us precious metals like gold and silver protect against inflation and currency debasement. But exactly how do precious metals safeguard your wealth? Let's dive into what inflation is, how it affects you, and what steps you can take to be protected.
Where does inflation come from?
Monetary expansion of currency—a fancy way of saying “printing money”—is a source of inflation. There are two terms that you should know: commodity money and fiat money. Commodity money is money that is created from or backed by a commodity, often a precious metal such as gold or silver. Fiat money is usually paper money that is authorized by the government but not based on (or converted into) gold or silver. The only way that paper currency enjoys legitimacy is by the mandate of the government. It has no value of its own; without the government mandate, it’s just paper. Fiat money can be printed and inflated, and when it is, the value of fiat money is being reduced as more paper currency is chasing after the same amount of goods. Commodity money, on the other hand, cannot be printed or inflated, and does have intrinsic value.
How does inflation affect me?
Essentially, our government and the Federal Reserve can create as much money as they want to because our monetary system doesn’t require our paper currency to be tied to a store of value like gold or silver. This manipulation of the money supply results in deficit spending and a loss in the purchasing power of the dollar, also known as inflation. This has led to a debasement of your money—effectively, your wealth has been transferred to the government. The ability of the government to inflate and increase the amount of currency is the overall biggest obstacle to your financial security, and it’s basically inflation-based wealth confiscation. Over the past century, there’s been an alarming drop in the value of the dollar.You feel it when you go to the supermarket, when you pay for your children’s higher education, and when you consider your next vacation: your dollars are worth less and less every year.
How do I protect my wealth?
The best way to protect your wealth is to diversify your portfolio with an inflation-proof asset like gold. Unlike the US dollar, precious metals cannot be debased by mass printing. The Federal Reserve can’t just print more whenever it feels the need—and precious metals’ intrinsic value means it’ll always be worth something, unlike paper money which would be rendered worthless without the government’s mandate.
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