Why Buy Gold? - The Dollar is Dying

It's easy to answer the question "Why buy gold?" U.S. consumers are seeing their buying power dwindle and unemployment rates rise as the government deploys crazy tactics in a hopeless effort to slow deflationary economic pressures.

If you follow the news you heard President Barack Obama publicly warn that the US economy was "very sick" and "the situation is worsening."

How low can interest rates go? Well, in December 2008, the Federal Reserve slashed rates for the tenth time since September 2007. They dropped from five and six percent to an almost panic level of zero percent.

At the same time Congress-approved Troubled Asset Relief Program (TARP) doled out $350 billion to frozen-up lending institutions, hoping to disintegrate the banks' hoarding spree.

According to a November 30, 2008 Los Angeles Times report, the Federal Reserve had, by that date, actually loaned, committed, and guaranteed amounts totaling over $8.5 trillion. Minimal fiscal improvements have surfaced from these government tactics. Subsequently in 2009, the US budget deficit will exceed $1 trillion while the national debt will pass $11 trillion.

This news is sending thinking investors into gold as they wait for an inflationary time bomb to drop . . . Consider this scenario:

The slowdown of the US economy is evidently cyclical, moving from less buying power to lost jobs and less demand for goods. To stimulate buying, the Federal Reserve has lowered interest rates dramatically to free up credit and stimulate purchasing. Resulting low bond yields will eventually cease to draw foreign investors, who fear the purchase of diluted dollars.

The Treasury will print more dollars to buy up bonds, diluting the dollar's value even more. A hyperinflation cocktail is about to be served.

That's reason enough to protect your buying power with gold, but there's more...

China and other Asian countries are still lending the US money and buying up its bonds, but to a lesser degree in past year. Their buying will continue only as long as consumers and businesses buy sizable amounts of Asian goods and services.

With bank credit lines frozen and unemployment rising dramatically, US consumer buying power continues its erosion as spending systematically decreases. Foreign investment holders may soon catch on to US inflation worries and sell off their dollar-denominated reserves, moving to more stable currencies. Some already have. Massive Treasury sell-offs could lead to dollar freefalls and interest rate spikes, then hyperinflation. The dollar would be worthless, wiping out American savings and retirement accounts in unprecedented amounts.

So why buy gold?

Buy gold as an investment. Buy gold as a hedge against inflation. Buy gold to preserve wealth.

Statistics show the only asset groups making gains in 2008 were Treasuries, corporate bonds, and gold.

Historically, the value of gold has risen with inflation, outperforming other investment vehicles during periods of economic turbulence. Even during hardy economic times, gold often finds its way into a prudent investor's portfolio.

Many leading economist find today's financial landscape comparable to that of the Great Depression-even Weimar Germany. Now is absolutely the time to begin thinking about moving assets to gold, before the dollar writes itself into history's books as the next great fiat currency collapse.