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Inflation hedge is defined in my quick and easy online search (accurate or not) as an investment ‘designed’ to protect against inflation risk. This is weird, because the best inflation hedges are natural resources.
Man doesn’t design them, he can only extract or produce them to the best of his ability. The reason they are inflation hedges is that governments can’t just, poof, create more of them.
Governments produce nothing. They only take and ‘redistribute’ wealth which either quickly or slowly destroys the original wealth – every time, without fail. Government has a record unblemished with success,
for destroying wealth! An inflation hedge is indirectly, but most importantly, protection against political risk. Gold, silver, cattle, cotton, iron, timber, farmland, etc.
An inflation hedge, or more than one, will protect your wealth as the lunatics in government and central banking continue to destroy global savings. What isn’t parabolic among commodities –
even garlic has doubled in the last year? Are you aware that commodities are the real things that we need to live: food, energy, materials for production? Their prices are all through the roof. They’re heading to the moon!
QE2, the infamous policy of flooding the economy with dollars, is largely responsible for this rise. If you have a finite or slow growing amount of goods and all of a sudden you create, with a few key strokes,
twice as much money, the price of those goods will double. This is a very basic example but it’s happening now, albeit at a slower, but no less dangerous, pace. Inflation hedges are hot!
This doesn’t mean that commodities or inflation hedges are immune to price fluctuations. In fact, wild times like these almost guarantee volatility and we have not had much volatility lately –
we’re due. If you don’t have a price portfolio in inflation hedges yet, you may want to look for a big correction to begin creating one. Gold prices are incredibly high – in dollar terms –
but gold is perhaps the most sensible of all inflation hedges – gold is money. Silver is also money, but it has industrial uses that are ever growing and this makes it’s price action more susceptible to volatility –
this is great, if you are looking to buy some, wait for a pull back. Food is number one, if we wish to steer this article down a gloomier path. Food that you have stored at home.
This is really the ultimate inflation hedge. If food prices get wild and unaffordable – it’s starve or steal! Door number one is unpleasant and door number two can mean taking a bullet from a farmer’s gun,
so it’s is sensible to protect oneself with a food source – either preserved foods stored away, or producing farm land. As the dollar and other paper currencies erode and die, trade will change dramatically.
Locally, you may find barter systems thrive and regional currencies spring up. Gold and silver will also be used as a medium of exchange. Do you own any?