![]() As we all feel the sting of rising inflation across goods and services, it’s crucial to recognize that only governments stand to benefit from this situation. The gradual erosion of currency value, which once went largely unnoticed, is now at the forefront of global discussions, dominating news channels worldwide. Understanding who controls the value of our currency, what has caused inflation, and how it can be addressed is essential. Over the past two decades, a combination of low-interest rates and excessive borrowing has resulted in Canada’s runaway housing bubble and, most notably, the surge in inflation. So, how does this translate into inflation acting as a stealth tax? As the value of the dollar declines, driven by sustained periods of low-interest rates, the cost of goods and services rises, along with the amount we pay in sales taxes (PST & GST) and now the Carbon Tax. In short, we end up spending more while earning the same. This scenario plays out in an environment of low-interest rates, which flood the market with dollars. Central banks create money and inject it into the system, increasing the money supply and diminishing the value of each dollar printed. Conversely, when interest rates rise, fewer dollars are created, which leads to a reduction in the money supply. This, in turn, requires fewer dollars to buy goods and services. This is a simplified explanation of how sound monetary policy works to prevent inflation and rising asset prices. Protecting Your Purchasing Power: Why Gold and Silver Matter To counter the erosion of our purchasing power, the most effective strategy is to add gold and silver to your portfolio. Without diving into the technicalities of how gold and silver preserve and even create wealth, consider this: Physical gold and silver come with no counterparty risk, they are universally liquid, and their value is driven by supply and demand. You have two ownership options: physical delivery or stored product. One is more liquid and less expensive to own than the other, but your personal preferences will likely dictate your choice. Ultimately, the decision should be based on liquidity. By incorporating gold or silver into your assets, you control a physical monetary metal that has historically moved counter to the US dollar and, under certain circumstances, has even appreciated alongside it. For Canadians, this is especially attractive during times of high or rising inflation. Gold & Silver Price (5-Year CAD Overview)
Written by – Rob McInerney
1 Comment
1/26/2022 08:23:50 pm
A very well written article with informative information about how to position yourself against the threat of inflation. It's actually no longer even a threat; it's a reality.
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AuthorNews & Updates are written by myself or when shared from the industry, credit is always given to writer. Rob Archives
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