Responding to investment advice by Dave Ramsey and others in mainstream media on the advantages of investing in CDs and real estate, NIA said that while on the surface, U.S. dollars appear to be 'safe haven' because they have a number on them that always stays the same. U.S. dollars are actually the riskiest asset you can possibly own when you have a Federal Reserve that has expanded its monetary base by 135% since September of 2008. What volatility in gold prices actually show you is just how unstable the U.S. dollar is, NIA said.
NIA said that if investment advice appearing in mainstream media is followed, investors would see their purchasing power of their savings wiped out.
20 years ago, senior citizens were able to purchase CDs and live off of the interest they collected. With just $200,000 in a CD, seniors would earn $17,000 per year in interest income. Combined with social security, they had plenty of money to live comfortably. Today, $200,000 in a CD would only earn $600 per year in interest income and $600 today only has the purchasing power of $150 compared to 1990. This means seniors are now earning 99% less interest income on their savings compared to 20 years ago. NIA believes CDs are a dumb investment, because the real rate of price inflation in the U.S. today is already north of 5%. Those who own CDs paying 0.3% interest, are seeing a dramatic decline in their purchasing power.
Gold is the best possible hedge against inflation because it is the most liquid asset in the world. If you own gold, it is possible to exchange it for any fiat currency instantaneously. Gold is easy to transport, easily dividable, very durable, fungible (one piece is equivalent to another - which is why diamonds can't be used as money), difficult to counterfeit, easily recognizable, expensive to produce (it can't be printed), with a value that's easy to determine at any time. These are all of the qualities that make a good inflation hedge.
Real Estate is not a good hedge against inflation because it's an asset that is very difficult to sell. In today's market it usually takes at least 12 to 18 months to sell a house and the transaction involves inspections, mortgage approvals, contracts, brokers commissions, etc. Considering the large shadow inventory of homes that will soon hit the market and cause a second wave of mortgage defaults, it will be many years until Real Estate is a good investment. By then, the median U.S. home will cost less than 1,000 ounces of silver.
Being a landlord with rental properties will not be a good business to be in during the upcoming U.S. hyperinflationary depression. In Weimar Germany during the years 1922-1923 before hyperinflation occurred, the average household spent 30.2% of their monthly expenditures on rent. By the third quarter of 1923, rents fell to just 0.2% of the average household's monthly expenditures. At the height of hyperinflation in Weimar Germany, households were spending 91.6% of their monthly expenditures on food, making it impossible for landlords to raise rents in any meaningful way. With a piece of fruit costing more than a month's rent, landlords saw their real rental income evaporate, NIA said in a statement.