From past 400 years, inflation has become a major economic problem in every country and of every individual. Inflation is a relative problem, if you live in a country with a good economy, then you don’t have to worry much about inflation.
By the end of 2017, the average inflation rate will be around 4% in the developed countries and 4% to 12% in the developing countries.
So, if you earn 1000 dollars today in a developed country, then the value of that 1000$ within 3 years will be just around 880$ which means for every 1000$ you earn in a year, an amount of 120$ just vanishes away if kept in a locker. The really bad thing about inflation is your loss will become exponential when you start saving more.
The story of Venezuela
Venezuela has the world’s highest inflation rate of 658.60%. That is the highest and the worst inflation rate this country has seen in its history. Venezuela’s inflation skyrocketed due to the reduced oil prices, political turmoil, corruption, and anarchy.
Nearly 45 countries have experienced hyperinflation like this just in last 80 years due to war, corruption, political mismanagement, et cetera…. which means hyperinflation is not a rare event at all. It can happen to any country at any time.
Normally, investors with a lot of money in their bank account worry about things like inflation. But truly, it’s the normal people with average income who should really care about it because every passing day your money gets less worthy and useless.
Experts say if the current population graph continues to follow the same trend, then within 30 years, we could enter a phase where it becomes impossible to control inflation.
So, it’s wise to care about it now before your hard earned money becomes no use to you in the future.
As an individual, you can tackle inflation mainly in three ways. As a matter of fact, you can actually make use of inflation to solidify your financial portfolio with these ways.
- Becoming self-sufficient (resource cornering)
It’s an old technique where people do one time investments and stack their godown with a lifetime worth of resources and non-perishable consumer products. But these days, becoming self-sufficient means producing your own energy and food. It is totally possible to produce your own food and energy with technologies like hydroponics integrated with solar panels.
Becoming self-savvy might be good for the individuals, but it is not so much good for the nation as a country needs its people to buy things to keep its economy going. So, this practice is illegal in some countries.
- Real estate
Before investing in real estate, look around the surroundings and its growth, assess the population of your surrounding, and also the political stability of your local governments. Because it’s worth having an acre of land in Switzerland than a 10 acres of land in Venezuela.
You have to make sure that the land you are buying has a future. Only then, real estate can actually become the best choice of investment.
Real estate is directly related to inflation, although unprecedented hyperinflation can bring down the real estate value of the place, moderate inflation rates actually rise the land value and give you unimaginably high returns.
- Precious metals
This is the best way to fight inflation. Precious metals like gold and silver have proved their worth throughout the history and still are the best options to confront inflation, financial bubble bursts, political and economic turmoil.
Gold acts as a hedge against inflation since it is the real money. Its chemical properties make it the best element to be used as a currency. Also, it has a never ending demand in the electronic market, jewelry, architecture, art and so on.
Gold is extremely malleable, conducts electricity, doesn’t tarnish, alloys well with other metals and is easy to work with wires or sheets. Not to mention, gold is unrivaled in its natural brilliant luster and glossy shine. All these factors make gold the most desirable asset in the world. So, gold never loses its value around the world.
Let’s talk about an ideal situation where you have bought a kg of gold and suddenly your government announces that it is going to a major war. What will happen? Stock market chokes, real estate prices plummet, currency gets devalued and your economy goes into a shit hole.
But, the gold value rises. Why? when in war, other countries don’t sell war equipment for currency since they are so volatile. They trade weapons for resources or real assets like gold and silver. Also, unlike in your country, other countries still have the same demand for the gold you hold. So your savings still has the same/more value even when the whole country is suffering an economic stroke. This is the reason why rich individuals, institutions, central and federal banks keep some percentage of their wealth in the form of precious metals.
There are many ways of owning physical gold. The best way is to buy gold bullion(coins and bars) from reputed companies and keep it in a gold IRA for extra tax benefits. Regal Assets is one of the most trusted companies in the US gold industry and they provide both these services. Before investing in gold, please get their gold investment kit for free of cost which might help you get more in depth knowledge on how gold investment works so that you can decide whether you are ready to invest in gold.