Stocks are up on speculation the European Central Bank (ECB) will act to stimulate growth in the union. Many of the EU countries are already in recession, and the hope is that printing more Euros will get the economy moving forward again.
We have seen that story in the US, and the best we can do is 2% GDP growth. However, when you take into account that inflation is running ahead of 2%, what you are left with is a net negative, 2% growth – 3% inflation = -1% net.
That’s not growth.
Here’s an example, worker Joe makes $1, and it used to cost him 99 cents to live. So he can save a penny. Now, Joe gets a raise to $1.02, (2% growth); however, it cost $1.03 to live. Joe goes from saving a penny to losing a penny; although his personal GDP grew.
Most people feel and understand this intuitively, but it is confusing to hear about a “recovery” while their money supply dwindles to higher costs of living. The disconnect is why so many people are taking to the streets on both sides of the political aisle.
Ok, so stocks rise in the short-term thanks to rumors and then eventually the reality that the EU and US are flooded with money. It is the pig through a python of excess money chasing returns. After all, nobody wants to collect 0% interest at the bank, right?
And that’s the game the Fed and ECB are playing; flood the economy with free money with near zero interest rates and the folks are incentivized to spend rather than save. Unfortunately, this trick, scheme, or strategy punishes the prudent to the benefit of risk takers. It rewards the young workers over the older fixed income retirees, the irresponsible over the responsible, and creates the insidious tax of inflation that hits us all.
So what can an investor do to protect their purchasing power when the people in power are hell bent on reducing the value of your money? The old saying is not to fight the Fed. Now it’s more like a Central Baking cartel that will steamroll you if you stand against the current.
The flow the bankers want you to take is to buy assets. Top Equity News specifically suggests gold and silver if the state financiers insist on firing up the printing presses. Both metals have lost some of their shine during the last few months.
However, if the ECB rumors prove to be premature facts, then ETFs like iShares Silver Trust (SLV) and iShares Gold Trust (IAU) should sparkle.
Stock Market Trends: Turning Dollars and Euros into Gold and Silver is an article from: 
