Quantitative Easing Is Destroying The Dollar

Quantitative easing started as a simple government solution to help stimulate the plow horse economy that is currently in existence in the US.  Basically quantitative easing is a way to increase the monetary supply and get more greenbacks into circulation.  When this happens, the hope is it will stimulate Americans to spend.  However, anytime easing occurs, it can compromise the ability for the central banks to control the money supply which leaves it vulnerable to hyperinflation.

 Being Rid Of The Gold Standard Could Destroy The Dollar

It used to be that the central banks were a clearing house for gold.  So, if you were an individual who had gold bullion you would take that bullion to the bank and exchange it for a paper certificate.  Therefore, every dollar that came out of the bank was backed by a tangible asset.  Currently, the gold standard doesn’t exist anywhere around the globe.  Today’s global monetary policy relies wholeheartedly on fiat currency.  A fiat currency is a piece of paper that is believed to have monetary value.  It is the faith in the paper money that allows it to be a medium of exchange.  The only reason a fiat currency works is because there is a belief that central banks have enough assets that can be sold to back the money supply  if need be.  If in all actuality this can’t happen, hyperinflation can and will occur.

Quantitative Easing Is Destroying Central Banks Debt To Equity Ratio

One primary flaw of quantitative easing is that it is slowly eroding the debt to equity ratio in the central banks.  In 2008 the Federal Reserve had about 41 billion in capital and 872 billion in liabilities.  This created a debt to equity ratio of 21:1.  Today, that ratio is sitting at around 51:1.  If another round of quantitative easing is implemented that ratio will further deteriorate.  The problem with this is that the majority of the “assets” are reliant on interest rates.  As long as interest rates remain low, the Fed has control over monetary value.  If interest rates rise, which we know they will because they are so incredibly low right now, the dollar will lose its purchasing power in a hurry; basically, the more easing that occurs, the more bleak the outlook for the US dollar.

Hedge Against Inflation And Protect Yourself From The Implications Of Quantitative Easing By Buying Gold

The only sure way to protect yourself from the destructive influence of inflation is to build a financial hedge by investing in gold and other tangible commodities.  Gold and silver has always held value and historically has held up in times of inflation.  As an investor if you haven’t looked up and seen the writing on the wall for the dollar, then it’s time you do so!  Talk to a redhawk advisor before it’s too late to protect your wealth, and take a position in precious metals to protect your assets.  For more information visit redhawkgoldandsilver.com/barney