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| Do Your Homework Before You Invest |
Prices are creeping up at the grocery store and gas pumps. Is this the start of hyperinflation? Should we change our investment plans? Should we buy gold? Maybe not.
From time to time you hear people say they are buying gold to protect themselves against the hyperinflation they fear is inevitable. They say that we can't keep borrowing money and printing money without debasing our currency. So they buy gold. They don't like fiat money, so they buy gold.
They are afraid of hyperinflation like happened in the German Weimar Republic after World War I. Or they worry we'll have runaway inflation like Zimbabwe. So they buy gold. Or silver. Or both. Are they right? Are they over-reacting? Before you decide to buy gold, be sure you are getting information from places other than websites devoted to selling you gold.
When you play Monopoly, you calculate which moves are likely to give you the best outcome. Shouldn't you do the same when considering making a major investment?
When you play Monopoly, you calculate which moves are likely to give you the best outcome. Shouldn't you do the same when considering making a major investment?
Click here for a detailed analysis of the chances of hyperinflation in the US written by Edward Harrison at Credit Writedowns. This is a good place to start considering what makes the most sense for you. As always, I'm not a financial planner--do your homework before you invest.
Click on any of the labels below this post for ways to fight inflation and other money saving tips.
Excellent article. I am so glad you published this. I have been wondering if I should buy gold with my limited money. Now I know.
ReplyDeleteEdwatd Harrison makes this topic easy to understand.
Thank you for publishing.
My pleasure, Roberta. Ed Harrison is very talented at explaining complicated topics in ways that make sense. As I said, I'm not trying to tell you what to invest in, but Ed is a good start in researching it.
DeleteI have a Hyperinflation FAQ that I am working on.
ReplyDeletehttp://howfiatdies.blogspot.com/2012/10/faq-for-hyperinflation-skeptics.html
Yes, I'm a skeptic, but I could be wrong! Good luck with your FAQ list!
Delete"Maybe no" indeed. People also don't realize that gold is three times more volatile than stocks. If you're buying gold, buckle your seat belt! ;-)
ReplyDeleteJoe, many people don't realize there is risk. If they want to buy and hold for the long term as a hedge against whatever, at least they should realize it will fluctuate in dollar value over time. I wouldn't put more than 10% of my savings in precious metals, but that's just my 2 cents.
DeleteBy the way, my Mom said during the Great Depression, prices on every day essentials went up while prices on luxury goods went down. So seeing the price of groceries and gas go up doesn't necessarily mean we will have runaway inflation.
ReplyDelete