Prominent Politicians Bet on Precious Metals
As the US debt grows greater and greater despite government efforts to stimulate the economy, the idea of investing in hard assets grows along its side. Fiat currency is money that is backed by the government. It is not backed by the value of reserves such as gold and is printed at will. In America, the Federal Reserve Bank is in charge of printing bills. The monetary policies implemented aim to maintain a healthy economy, but lately, Federal Reserve Chairman Ben Bernanke’s strategy of buying securities to pump money into the system are serving first and foremost the interests of Wall Street and the Big Four (Bank of America, Citigroup, JPMorgan Chase, Wells Fargo)…and there is no end in sight.
Quantitative easing (QE) is an effort to stimulate the economy. It is usually a last-resort attempt that encourages banks to lend money to small businesses and homeowners so that they can fuel the economy once more. In a “perfect world,” quantitative easing drives down interest rates in order to stimulate the economy. The more money banks lend the more jobs small businesses can add and the more consumers can spend. In order to increase the supply of cash, the Federal Reserve buys government securities or securities such as bonds from large banks. This is our own government “debt.” In late 2008, the Fed bought mortgage-backed securities worth $600 billion. This amount has grown ever since.
We are now in QE3, or the third period of quantitative easing. It continues pumping $85 billion a month into the system. Many economists and politicians believe it is necessary to continue QE3 (dubbed QE Infinity because the experts don’t know when to quit) until the economy is back on its feet. Though the economy is slowly getting better, it is not improving as quickly as expected.
Although companies are using the money issued by the stimulus effort, they are not using it to hire more workers or expand their business. They are using it to pay off old debts. They are even hoarding some of it because they don’t see the economy improving any time soon. America’s national debt is at an all-time high of nearly seventeen trillion dollars. This number grows by thousands of dollars a second. Today, unemployment is rampant and hard working Americans continue to earn less than they need to live. Most people who can work need two jobs to make ends meet. The value of the US dollar has dropped over 10% since the dawn of the financial crisis in 2008. In just five years, what could be purchased with $20 in your pocket requires over $30.
Such inflation is felt deep in pockets of the middle and lower classes. Politicians like former Republican Congressman Ron Paul of Texas and Tea Party Activist Herman Cain understand the processes that lead to an economic recession and hard times. They know that politicians are to blame for our sorry economic state. They do not trust those in power though they themselves hold positions of leadership. During times of political and economic uncertainty, gold and other precious metals outperform failed currencies.