Anyone concerned about retirement income should think about the future in terms of purchasing power. If inflation jumps up to 10% (it reached 19% in 1981), money in savings accounts will be devastated. Inflation transfers wealth from retirees to workers. Words: 402
In further edited excerpts from the original article* Michael Myers (www.retirementcrisisinvesting.com) goes on to say:
The longer the Fed keeps interest rates near zero, the more worthless paper money becomes. That creates the impression that gold is more valuable but, in fact, it is that the paper money in which the price of gold is denominated is becoming less valuable.
In other words, gold is the constant. Its value doesn’t change. Its dollar price changes, but not its value, so when investors come to me and ask me how they can hedge against the falling value of the dollar, I always tell them to buy gold.
You can’t escape the falling dollar by buying other currencies like the euro or the yen – they’re just paper, too – and you can’t escape with stocks. Fine, stocks are up something like 70% since the March bottom but that’s only if you price stocks in dollars. Try pricing stocks in gold — in other words, how many ounces of gold will one unit of the S&P 500 or the Dow Jones Industrial Average buy? If you think about it that way, with gold now at or near all-time highs, then stocks are really only up about 34%.
OK, 34% is great but think of the risk you took to get it and remember that in terms of real purchasing power — the ability to buy an ounce of gold, to acquire real value — stocks only went up about half as much as it seems on the surface. The other half is just the value of the dollar collapsing.
It’s going to get worse. The Fed is going to keep rates at zero just about forever. The government isn’t going to stop spending. Treasury Secretary Tim Geithner is going to try to make the dollar even cheaper by getting exporting nations like China to raise the value of their currencies.
So it’s like I’ve been saying for a couple years now. Buy gold. It’s that simple.
– The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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