Why Buy
Gold? - Looming Hyperinflation
"Why buy gold?" Simple, consumers are seeing their buying
power dwindle and unemployment rates rise as the US government
deploys risky tactics to slow deflationary economic
pressures.
In early January 2009, President-Elect Barack Obama publicly
warned that the US economy was "very sick" and "the situation
is worsening."
In December 2008, the Federal Reserve lowered interest rates
for the tenth time since September 2007, moving rates from five
and six percent to an almost unheard-of zero percent.
Meanwhile, the Congress-approved Troubled Asset Relief
Program (TARP) doled out $350 billion to frozen-up lending
institutions, hoping to disintegrate the banks' hoarding
spree.
According to a November 30, 2008 Los Angeles Times report,
the Federal Reserve had, by that date, actually loaned,
committed, and guaranteed amounts totaling over $8.5 trillion.
Minimal fiscal improvements have surfaced from these government
tactics. Subsequently in 2009, the US budget deficit will
exceed $1 trillion while the national debt will pass $11
trillion.
This news is sending thinking investors into gold as they
wait for an inflationary time bomb to drop . . . Consider this
scenario:
The slowdown of the US economy is evidently cyclical, moving
from less buying power to lost jobs and less demand for goods.
To stimulate buying, the Federal Reserve has lowered interest
rates dramatically to free up credit and stimulate purchasing.
Resulting low bond yields will eventually cease to draw foreign
investors, who fear the purchase of diluted dollars.
The Treasury will print more dollars to buy up bonds,
diluting the dollar's value even more. A hyperinflation
cocktail is about to be served.
That's reason enough to protect your buying power with gold,
but there's more…
China and other Asian countries are still lending the US
money and buying up its bonds, but to a lesser degree in past
year. Their buying will continue only as long as consumers and
businesses buy sizable amounts of Asian goods and services.
With bank credit lines frozen and unemployment rising
dramatically, US consumer buying power continues its erosion as
spending systematically decreases. Foreign investment holders
may soon catch on to US inflation worries and sell off their
dollar-denominated reserves, moving to more stable currencies.
Some already have. Massive Treasury sell-offs could lead to
dollar freefalls and interest rate spikes, then hyperinflation.
The dollar would be worthless, wiping out American savings and
retirement accounts in unprecedented amounts.
So why buy gold?
Buy gold as an investment. Buy gold as a hedge against
inflation. Buy gold to preserve wealth.
Statistics show the only asset groups making gains in 2008 were
Treasuries, corporate bonds, and gold.
Historically, the value of gold has risen with inflation,
outperforming other investment vehicles during periods of
economic turbulence. Even during hardy economic times, gold
often finds its way into a prudent investor's portfolio.
Many leading economist find today's financial landscape
comparable to that of the Great Depression-even Weimar Germany.
Now is absolutely the time to begin thinking about moving
assets to gold, before the dollar writes itself into history's
books as the next great fiat currency
collapse.
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