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Buy Gold Now - How and why to buy gold

Buy Gold Now: Why should you buy gold? How do you buy gold? Investment expert Shayne McGuire explains how to profit from this precious metal and how buying gold can protect you from financial risk. Read more about Buy Gold Now >

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1 - What is Inflation & Why is it a Risk to Your Wealth?

"The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens." John Maynard Keynes

At the time of writing (July 2009), I have some grave concerns that the massive stimulus measures introduced by governments around the world in response to the financial crisis will lead to an unrecoverable and therefore uncontrollable inflation or hyperinflation in the near future. The winners in such circumstances will be those who have bought physical gold, silver or platinum bullion because anyone holding paper assets such as cash, bonds, treasuries, and anyone relying on a pension or a fixed income stream will see their wealth disappear as the inflation plays out. I am particularly concerned about the outlook for assets denominated in US Dollars and British Pounds.

What is Inflation?

The majority of people believe inflation to be rising prices, say on a general basket of goods. But in doing so they mistake a collateral effect for a cause. I ask you to consider what force is in place before rising prices occur in order to give them that upward momentum?

Inflation is the decrease in the value of money due to the printing of an excess of it. Each new unit which is created reduces the value of all units which preceded it, such that an item purchased after money printing requires a higher number of units (as each one is now lower in value) than were required to purchase the same item before money printing occurred. As a direct result of the money printing, the value of money falls and prices rise.

Why does a loaf of bread now cost many times more than it did twenty years ago? The ingredients used to make the bread are unchanged. Intuitively you might even expect the cost of a loaf to decrease when factoring in all of the advancements in productivity, farm machinery, production techniques and transportation. It doesn’t quite make sense why loaf of bread costs substantially more today. Until, that is, you understand that the value of the money in our pockets has fallen during that time, causing the price of bread to rise by a compensatory amount.

Why is Inflation Now a Major Risk to Your Financial Security?

As a result of four decades of excess government money printing and inflation, our real salaries, savings and quality of life have decreased. We need more paper dollars and pounds to buy everyday products than we used to and we have to work harder to earn them. Unfortunately, the current inflation is now entering its final stages and will destroy the wealth of those who do not understand how it works. I have written these “Essentials” in an attempt to explain this complicated concept as simply as possible, so that you may become better informed about likely future events and can begin to consider an appropriate action plan for you and your family.

Continue to 2 "The Journey to a Stable Monetary System"
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