When thinking of the Federal Reserve System the first caveat one should realize is that it is run by Keynesian economists who believe that inflation is beneficial to the American economy. “Keynesian” of course refers to 20th century British economist John Maynard Keynes who advocated a large, centrally planned role for national governments in their economies. A consequence of this thinking involves central banks (like the Fed) and colossal debt.
The Federal Reserve is an example of central economic planning. Its Board of Governors controls the money supply and wields control over its value and cost through the manipulation of interest rates, bank reserve ratios and monetary inflation. The Fed’s actions redistribute wealth and warp spending and investment patterns. Virtually every major financial action we undertake as citizens, from buying homes or cars to investments, must be viewed with an eye to the Fed’s policies.
Keynesians endorse America’s fiat currency since it allows the federal government to borrow and spend massively in hopes of jumpstarting a troubled economy through deficit spending. The idea is to produce economic growth that outpaces the accumulation of debt. But the dollars added to the nation’s money supply do not create wealth; they serve to dilute consumers’ purchasing power.
In 2012 the Federal Open Market Committee, the policy-making arm of the Fed, unequivocally stated that they intend to devalue the U.S. dollar by 33% over the next 20 years. Charles Kadlec of ‘Forbes’ magazine comments that this action by the Fed will devalue “nearly 10% … of American’s hard earned savings over the next four years.” This is an act of larceny against America’s wage earners and savers – no two ways about it.
Consider inflation a tax – both Keynes and Fed Chairman Ben Bernanke do. Look at this famous quote from Keynes: “By (inflation) government may secretly and unobserved confiscate the wealth of the people and not one man in a million will detect the theft.” In his testimony to the House Financial Services Committee on July 16, 2008 Bernanke flatly states that “Inflation is a tax.” What’s more, the Fed is the biggest taxer in the United States – by increasing the money supply arbitrarily without an appropriation process the Fed dilutes the purchasing power of ordinary Americans and lowers the standard of living for wage earners and retirees living on fixed incomes.
Inflation certainly is not a recent phenomenon – older Americans remember double digit inflation of the late 1970s and early 1980s. But back then at least interest rates paid on bank issued certificates of deposit gave a decent return. Interest paid on time deposits have hovered around zero since late 2008. Meanwhile, inflation measured at even the relatively low rate of 3% per year (the case can be made that actual inflation is much higher) means that $1,000 at the beginning of 2009 would be worth less than $900 today in terms of purchasing power.
On the other hand, someone who bought $1,000 in gold at the beginning of 2009 would realize an increase of 68% – in other words, their $1,000 would now be worth $1,680 as of 10 July 2013. This doesn’t include the record highs gold topped in 2011. The point to be taken is that gold has trended upward since the heady days of 16% returns on CDs in the early 1980s as the graph below indicates.
Graph courtesy of kitco metals
These numbers demonstrate why gold has been regarded as a hedge against inflation and a bulwark against economic uncertainty. Since inflation is the retiree’s public enemy one it makes sense to protect one’s retirement with a precious metals IRA backed with gold. Many companies offer gold IRAs – but due diligence will show the investor that the best company from which to buy gold, silver, palladium and platinum is Regal Assets. They’re also experts in establishing or rolling over existing IRAs and 401k accounts into those backed by gold. These self-directed IRAs buy and sell precious metals (and stocks) at your direction but their knowledgeable and friendly advisors are delighted to explain the details of investing in these accounts. They’re an “A+” rated business by the Better Business Bureau and an “Accredited Business” with a five star rating from BBB offshoot TrustLink. Visit their website for a complementary gold investment kit or call them at 855-637-1153 to learn more. Protect the wealth that you’ve a lifetime accumulating with a precious metals IRA from Regal Assets and enjoy peace of mind for your retirement.
Sorry, comments are closed for this post.