Posted on 31 July 2014.
When people hear the word ‘inflation’ they usually think of post WW2 Germany and the Weimar Republic currency collapse. Or, perhaps a little more recently, Zimbabwe, where their currency got restructured to the tune of one million old “dollars” for one new one. However, inflation is currently on the rise in North America too, which has major implications for our quality of life.
When the financial crisis of 2008 hit and the stock market, gigantic corporations, and the big banks took a major nose dive. To bail them out, the US Federal Reserve (central bank) began printing unprecedented amounts of dollars to prop up the markets and produce the appearance that everything would be alright and that the economy was “in recovery”. Without getting into the fact unemployment (when measured by historical standards, not the standards adopted in the Clinton administration) has been steadily on the rise, the only thing these actions produced was more dollars in the system, which lead to higher prices for consumable goods.
If you remember, the Canadian dollar, or “Loonie” as it is referred to, actually rose above par with the American dollar for the first time in several decades. This wasn’t a result of the Loonie growing stronger, it was a result of the Dollar becoming weaker from the increased supply of new money entering the system. Canada quickly realized the negative consequences of a stronger dollar in regards to exporting to our American neighbours, and we weakened our currency to pre-crisis levels by printing some money of our own.
So, to keep up with the Jones’, we’ve actually baked inflation into our own currency cake, and it’s starting to show in everyday prices. McDonalds recently eliminated it’s dollar value menu due to the declining profit margins. Gas prices have risen to near record highs again, and regular commodities like grains have raised the prices in the grocery stores too. When was the last time it was acceptable to pay over five bucks for a loaf of bread? It’s not uncommon anymore, as the price of all of our food will rise based on the increased amount of money it takes to produce the same amount of food it did 10 years ago.
As fiat currency continues to be introduced to all western banking systems at an unsustainable rate, expect all of your household items to increase in price in the foreseeable future. Also, while the concept of hyperinflation seems unworldly to most folks living in North America, it is really only a few irresponsible government monetary policies away.
So, what can you do to protect the financial assets you’ve worked so hard to accumulate? Think about moving some of your money into tangible goods, that have intrinsic value. Items like precious metals (gold, silver, platinum) have been an increasingly popular safe haven for investors wishing to protect themselves against the ravages of inflation. Non-central currencies, like BitCoin, although not backed by any real assets, are also exploding in popularity due t the fact that they are out of government hands and cannot be manipulated by the people in power. People are also paying untold of highs for items like fine art, jewels, antiques and property. These are things that will retain their value against rising prices and can be gifted to members of your family for safe keeping.
Of course, this article is not meant to scare you into thinking the world will end, but it is meant to open your eyes to the fact that our government controlled currencies have a finite useful life. Be smart about what you buy, and where you spend your money.