We indeed live in turbulent economic times. The national debt in the United States is over 16 trillion dollars and growing, and much of Europe is in recession. Both the Federal Reserve and the European Central Bank are flooding their economies with fiat money to stimulate battered economies. As a result, many are calling for a return to the gold standard which would force governments to stop printing paper money with impunity. It is, however, highly unlikely that the United States will return to anything resembling a gold standard anytime soon.
According to dailyfinace.com, returning to the gold standard is a highly controversial idea, and many economists are indeed skeptical it would solve our current problems. While we will not return to a gold standard, you should back your own paper investments with gold and silver for financial security, because relying on flat currencies is not the answer to financial stability.
It is important to understand the concept of what a flat currency is, before investing in gold. Fiat money allows the government to exert control over the economy. When prices drop too fast, like when the real estate market tanked the government pumped more money into the economy to inflate and therefore steady prices within the market.
Dailyfinace.com goes on to say if prices are going up too fast, the government can back off on the paper money printing presses to stabilize prices. The FED is tasked with maximizing employment, keeping prices stable, and moderating interest rates. When the dollar was backed by gold the government needed to have the gold on hand to back the money supply. This restricted the amount of influence and leverages the government and FED could use to manage the economy.
Golding Investing News reports that the Federal Reserve is upping its current bond buying program by $45 billion per month. This will cause prices to rise and inflation may return. As a result, our dollars will be worth less, and stocks will remain flat. Yet, gold and silver should rise, making them a sound investment for the future. Hard asset investing has become quite in vogue since the Great Recession. As a result, central banks are hoarding gold, and investors should follow their lead.
Gold Investing News also states that the approaching fiscal cliff has stimulated gold bullion coin buying. Why? This is because gold tends to thrive during economic uncertainty, and if the fiscal cliff is not resolved the US could end up in recession. As mentioned, nations are unlikely to return to the gold standard. However, there are enough economic factors working that will force gold’s spot price upward meaning you can secure your paper assets with gold.
In the end, investing in gold is the best way to protect paper assets from crumbling. While it may make economic sense for the government to use fiat money to manage their economies, it also creates much uncertainty. Investing in gold is the best hedge there is against inflation and economic turmoil. Savvy investors buy their gold and silver bullion from Monex, the most trusted name in the business. Their over 40 years of precious metal investing experience will take your hard asset portfolio to a whole new level.