Our nation’s economic vital signs have been faint throughout much of the last two years, but recent indicators show that the US investors could soon see economic recovery on the horizon. However, the positive signs from our government’s most recently released data should be for all practical purposes disregarded, because the current trend is for investors to buy gold for a hedge against inflation. There are two kinds of inflation that a nation’s economy may suffer, cost-push inflation and demand-pull inflation. The rising cost of goods is the main reason for increased prices in a cost-push inflationary scenario. The United States is suffering from plummeting home values and corporate debt is at an all-time high, so this type of inflation is not currently affecting our nation. The other type of inflation occurs when the amount of available money exceeds the amount of goods and services that do exist. Does this sound familiar?
Our government has incessantly ran the printing presses over the last three years, producing over 40% more money within that time frame. Our leaders in Washington approved a bailout and stimulus plan that has a tally of $11 trillion so far, and many economists expect our lawmakers to ask for more stimulus money. Federal Reserve Chairman Ben Bernanke could raise the key lending rate at any time, and many feel that he could do this before long, since Australia’s central bank just made a similar move after announcing that their recovery was underway. The demand-pull inflation that American investors see today will most likely look like child’s play after we endure the next few years. Hyperinflation and even stagflation are the main fears of many US economists, who think that raised interest rates will flood the market with currency, even if new jobs and businesses are still non-existent. These widespread worries have affected many of today’s investors, and this is why so many investors have decided to buy gold as a hedge against inflation that our nation could feel now, and in the future.
Steven Martin
Senior Gold Specialist - Buy-Gold.org
