What causes inflation and why buy
gold? You may well ask. Most of us tend to simply accept rising prices
and not to question inflation. The Economists actually say we need inflation
because it means the economy in growing and an economy with very low inflation
is in trouble.
With the monetary systems as we
have today it is true. Inflation is a sign of more money circulating meaning
people are buying and if they are buying the goods and services needs to
produced and thus there is work.
If an economy slows down the
governments pumps money into the economy in the hope that it will cause people
to spend. The problem is that psychology also plays a role in people’s spending
decisions and more money does not always cause inflation and on the other hand
too much money can cause hyperinflation. The human psyche cannot be pinned down
by economic theory, thus, inflation as well as deflation sometimes as
unintended consequences.
So basically I have answered you
question, inflation is caused by more money circulating in the economy. More
money chasing the good and services available and thus the prices escalate
according to the normal mechanism of supply and demand. Causing inflation, and
in bad circumstances hyperinflation
Now you may well ask me what this
has to do with gold. Have a look at this graph that shows you how the price of
Gold increased in Rand over the years. You will notice it is just up and up all
the time. This means that the same amount of gold still has the buying power as
20 years ago. So a very good reason to buy gold for the future (Karatbars makes
it easy and affordable) More about Karatbars
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Gold is your best hedge against
inflation. This graph is for the Rand, but it is the same for almost any
denomination. Inflation eats away at your savings
How is money created?
- The government simply prints more money
- Banks create money by the system of multiplying (fractional reserve banking, causing inflation)
- Fiduciary money also created on computers
In the economy there actually
exist different kinds of money:
- Commodity Money
- Fiat Money
- Fiduciary Money (not considered legal tender and depends on trust)
- Commercial Bank Money created by fractional reserve banking
If we have to be really correct
Commodity Money is the only real money and Fiat Money is simply paper currency backed by nothing but the word of the government printing it! All of this is of
course what causes inflation.
People really need to think about
gold. Most people will say immediately that they cannot afford gold. Under
normal circumstances that is true, considering the gold price. This is where
Karatbars comes in with CashGold. You can buy in really small amounts for the
price of a hamburger you can buy 0.1g of gold and slowly build up your Gold
Cache, thus everybody’s gold cache! What is more, if you do not want it
delivered they will store it for you. Karatbars however, delivers to more than
120 countries by FedEx.
I think what is important here is
to realise that this is a slow building up of your gold cahce for a safer
future, this is not a gat rich quick scheme, this is conscious saving for the
future in a commodity that has been recognized as money from BC.
You will find that most economist agree
these days that as a hedge against inflation it is a good idea to save in some
gold