American Currency's Purchasing Power To Become Worthless?

Concerned over the fact that the Americans' money may soon become worthless, the United States Federal Reserve has been endeavoring to find out ways and means to boost up expectations regarding inflation. The Federal Reserve's efforts are actually aimed at cheering the Americans to increase their expenditures so that they can use up their accumulated money before it becomes useless. However, it is regrettable that there is little doubt that their money would soon become useless, but it would also literally be of little significance.

Risk of a major or hyper inflation likely by 2012

Experts are of the view that in case the U.S. Federal Reserve fails to increase the interest rates notably with immediate effect, there is a grave possibility of the present 'meltup' may develop into a major inflation or price rises. In fact, some experts also apprehend that the United States may even witness a hyper-inflation some time before 2012! However, the fact remains that there is no indication, whatsoever, that the Federal Reserve will act and raise the interest rates in the near future.

Federal Reserve lacks control over inflation

It is important to note that no words of the Federal Reserve can change the current situation in any longer. In fact, the Federal Reserve has been saying that it wishes for inflation in order that at the time when a major inflation does happen, they would possibly be in a position to control it. That the prices of gold have gone up by more than 25 per cent and that of silver by around 60 per cent since the commencement of the current year, is enough evidence of the fact that the U.S. Federal Reserve has no control, whatsoever, of inflation. This also reflects that the U.S. may sooner or later witness a serious currency crisis, which is said to be in progress.

As is known, presently the world is swamped with surplus liquidity of U.S. dollars. In fact, the Americans are actually fortunate that thus far, nations across the globe have been accumulating or hoarding the U.S. dollars with the belief that they would act as a safe refuge during the current economically uncertain times. According to some experts, the strong confidence of the world in the U.S. dollar as well as a robust demand for the U.S. treasuries, regardless of the necessity for the Federal Reserve to monetize or make up the nation's national debt of around $13.6 trillion would some day be considered to be the most inexplicable irony of the present generation.

A hyper-inflation may result in the collapse of the society

Presently, the common American citizen is continuing to transfer money into the U.S. treasuries. These are the same people who were routed early this century when the dot-com bubble burst; they were also left a devastated lot when the real estate bubble collapsed and presently the same people are mobilizing into assets that are dollar-dominated. At the same time, the Federal Reserve has been endeavoring to annihilate the buying power of the U.S. dollar. In fact, the sole focus of the Federal Reserve should now be on finding ways to prevent a hyper-inflation from occurring, since it has been seen time and again that whenever there is a hyper-inflation, it results in a total collapse of the community.

Investment counselors oblivious of ways to protect from inflation

Just about every investment advisor in America are telling their clients now that the safest investments they can have is to buy government bonds, since these bonds are endorsed by the complete faith and recognition of the government. For most American investment advisors it is quite common today to suggest their clients to invest around 25 per cent or even more of their assets into the United States government bonds and keep an additional 25 per cent of their assets in the U.S. dollars in cash. Still, presently there is virtually no investment counselor who would advise his or her client to invest over five per cent of their money into gold.

How much gold can save one from inflation?

It needs to be noted that people investing just five per cent of their money into gold may perhaps find that they have only maintained five per cent of their buying power in the future. In fact, the National Inflation Association (NIA) or any of its co-founders are known to be investment advisors. However, people's observations have continuously underscored their faiths that there is nothing like owning or possessing surplus gold reserves or investing one's assets into too much gold. According to NIA, the portfolios of individual investors ought to be cent per cent in assets that will either preserve or, still better, enhance their purchasing power in the event of any hyper-inflation. In fact, the sole question that any intelligent investor need to ask him or her is what ought to be the precise proportion of assets that they should invest into material gold, material silver, agricultural commodities, mining stocks and so on for retaining maximum purchasing power.

It is interesting to note that although the U.S. President Barak Obama has been continually stating that he would not increase the taxes for people who are earning below $200,000 annually, he has not been doing totally anything that would help to lessen the expenditures of the government. While emerging economy China and Japan have been preparing to stop the rein of the U.S. dollar, in future the deficit spending of the U.S. government would have to be met by printing more currency notes. In fact, the middle class Americans face the risk of facing the most horrible thing if the monetary price inflation leads to price inflation, which appears to be imminent. In fact, the Obama government's inflation is unlikely to affect the wealthy Americans in a great way since if the affluent in the United States are educated and act fast enough; they would still be able to retain the purchasing power of their assets by acquiring physical gold and physical silver.

Obama intends to bring down the U.S. budget deficit from the current $1.6 trillion to $752 billion, but this is entirely dependent on the 5.58 per cent annual GDP growth of the nation as well as the interest rates on the country's public debt of just 4.1 per cent. In fact, the sole way to witness an annual GDP growth of 5.58 per cent is by means of an enormous inflation and at the time when inflation turns out to be unmanageable, it will also affect the interest rates in a similar manner. In a situation like that you need to ask yourself a few pertinent questions - Whether you possess any physical gold or physical silver in your investment portfolio? And if you think you do have, then you need to ask yourself whether they are sufficient enough or not. If they are not, you need to again ask yourself, as to why do you think they are not enough for you to retain your purchasing power during a hyper-inflation.

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