Wednesday, August 08, 2012

The inflation beats you senseless

I've made a PDF from assembled pages from an online publication, about how to beat inflation. It has an interesting overview of the history of how the gold standard gradually disappeared from different countries during the 20th century, and tips for some of the best bets on how to avoid loosing your nest egg if your currency collapses as they have been known to.
The present economy is based on debt, insane though that may sound. And the money is based on nothing except the word of the banks and the governments. And they can make more money when they want. The ones who stand to lose are ordinary people who have made savings, trusting that the safest thing in the world is "money in the bank". Hah, it's even an expression meaning "safe"!


Bruce said...

I like to use the term "money bubble." It fits in with other bubbles that have popped lately.

Ken said...

None of the people recommending gold mention the possibility of a gold bubble. The price has been pushed high by speculation, rather than any intrinsic value. There is a massive supply compared to actual demand for industrial or jewellery.

Eolake Stobblehouse said...

Well, this is all true. And gold *could* certainly drop in value again. But I think that it will only do so if the global economy corrects and grows more and more sound pretty rapidly, and that seems, sadly, very unlikely.

Some people may buy gold as speculation. This would have been very smart ten years ago. Now, I think it's a 50/50 chance.
BUT: another view is to get a 10-20% portfolio of gold as *insurance*. If the economy goes up, gold will fall, but probably not fast. Then your other assets will go up. If the economy goes down, other assets will go down, and gold will go up. It's a strong balancing factor. (Thanks to TTL for recommending me Fail-Safe Investing by Harry Browne.)

It's true it has no intrinsic value, but paper money has even less so! They have only trust. With gold, the trust is based not just on a government, but also on the metal itself, which has almost always, almost anywhere, been good, solid money. Gold has been high and low (around the millennium *very* low, but it took two decades to get there), but it has never been zero, or anywhere near.
If I was put in a time machine and had no idea in which country or when I'd arrive, I'd bring some gold Sovereigns! (Quarter ounce British coins, they say it's the most well-known in the world.)

A few coins in a bank box is something you may keep always and give to your heirs, which would be great, but it is also a last-ditch hedge against collapses of banks, governments, and paper money, something which has happened many times even in living memory.

Pascal [P-04referent] said...

I say organized religion is not very different. They get peopke to invest everything in God. The clever part here, is that by the time you get to cash in (or attempt to), there's no way to come and ask for your money back.
"Call and donate now, it's all for Jesus!" (minus my humble 98% fee)

What was that? You were talking about GOLD, not GOD?
Oops. My bad.

"If I was put in a time machine and had no idea in which country or when I'd arrive, I'd bring some gold Sovereigns"
I'd recommend throwing a good musket on top of them, m'lord. Another nearly universal value is the reflex of envy and the act of arbitrary/forcible, uhm, "appropriation". [I once met a Ferengi gas station attendant around 3025 AD...]

Excuse me, I have to go urgently now. After a week of me being busy at work, this morningg my cat's going berzerk for some play time. Something highly valuable to her. "To be spent immediately. Until I am purrrfectly SPENT."