Gold and Inflation

For those of you who aren't interested in truly understanding macroeconomics I wanted to post a simple overview of precious metals and why they should be in your portfolio.

Inflation Tax: The monetary systems of the world work on a fractional reserve system. Essentially, this means that money does have some basis, but is printed at a substantially larger rate than it is invested in the monetary base. If that ratio(fraction) is 7:1 then 1 dollar must be held in order to print 7. This all seems crooked, but somewhat reasonable and accepted now.

Supply and demand: Two great economies are reaching a tipping point currently. They are India and China. The middle class in both of these countries fully understands what a great investment vehicle Gold and Silver are and will be increasing their purchases as their ability to do so improves. Both of these countries understand the dire straits the dollar is in currently and are working diligently to build a replacement middle class in the east to consume the goods produced.

Banks and inflation perception: Banks are inflating at record rates. The reasons for this are fairly simple. The US Dollar is being inflated at extreme rates and to keep the prices of exports low the central banks around the world are inflating at HIGHER rates to keep their respective currencies lower than the dollar. The banks don't want this information in public hands or want the consumer prices to reflect this inflation. One of the indicators of how much they are inflating is the price of gold. Therefore the central banks dump gold on the market at a steady rate to keep the price down.

Gold and Silver are very much like a compressed spring at this point. When the downward pressure from the banks releases even a little, Gold and Silver prices will launch at amazing rates.