Assuming you purchase the same things on a weekly basis that many other folks in the United States buy you have most likely taken note of the way the prices of common household items and groceries have been on the rise. This is known as price inflation and while most of us know a little about inflation it can be confusing subject and sometimes the things we think we know are actually partly or completely inaccurate. Let's take a closer look at how inflation impacts our day-to-day lives.
There are actually different kinds of inflation. The type we notice at the store is called price inflation but the type of inflation that lays the foundation for price inflation is known as monetary or money supply inflation. The organization responsible for money supply inflation in the United States is the Federal Reserve.
In the past various banks around the country controlled their own money supply but the system was unified in 1913 with the creation of the Federal Reserve. The trouble is that with the money creation machine centralized it became harder to escape from monetary inflation and the resulting price inflation. Since theception of the Fed we have seen the value of the dollar plummet almost 100%.
What this means is that a dollar today will not buy what one dollar would buy one hundred years ago. This is extremely unjust and since inflation is continuing we can be assured that our money saved up and in the bank know will be less valuable down the road than it is today. Since money supply inflation involves the printing of new currency or the creation of new digital money each unit of money already in existence is devalued by each new unit created.
This leads to higher prices for those of us buying everyday goods and services like gas, apples, bananas and laptops. Sometimes the level of productivity and innovation in an economy can outpace the level of inflation and we can see price deflation in certain sectors. This is a wonderful thing and has happened in the computer sector for many years in a row. We can now buy extremely powerful computers that not only fit on our desks but in our hands and do so at a price that continues to drop in many cases.
Commodity goods like fuel and metals on the other hand tend to hold their value against rising prices. This means that you always have to hand over more dollars to get the same amount of gas or the same amount of copper wiring. You can use this to your advantage in some cases by purchasing gold and silver as a form of savings. If you had begun to do this in 2001 you would have seen your silver go from $ 4.25 per ounce to over $ 30 and your gold go from about $ 235 per ounce to $ 1,700.
Sometimes experienced individuals go even farther than merely buying some silver coins as inflation protection. If you are experienced in paintings or collectibles you may be able to use these interests and hobbies as a way to protect your savings as well. Rare items like paintings, old coins and limited production run silver certificates can be valuable things to research if you have knowledge in the arena.
If you do not then a good place to start is with the common-though out of production- silver quarters that were used in the US until the middle of the 1960s. You can also look into other options like moving some of your savings into another currency that is doing better than the American dollar. Remember that even if inflation is slow and steady it can accelerate so if you want to make plans to protect your savings now is the time to begin!
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