In A Zero Interest Rate Economy, Where Can Investors Put Their Money?
Where can you put your cash?
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The current economic climate
Jim Rickards, the American financial analyst, has said we’re living in an era of financial repression. Interest rates are being held low all over the world. And in the meantime, central banks are doling out huge sums of money to their pals in the financial sector. We’re told that it’s all in the name of keeping the banks functioning and liquid. Yet, we’ve had more than eight years of this and wages for the average person aren’t rising.
In fact, you could argue that we’re in a worse position now than we were before the crisis hit. We’ve got slow growth in both Europe and America. And yet the price that has been paid for all that growth has been enormous. Since Obama took office, US debt has doubled from roughly $10 trillion to $20 trillion. And it’s not just in the US that we’ve seen tremendous growth in budget deficits. In most European countries, it’s been the same story. Weak growth and high public debt.
You would have thought that for all that debt, the economy would have grown significantly. But, of course, it hasn’t. And as a result, ordinary people are feeling the pinch, including investors. The reason interest rates haven’t risen isn’t because the economy needs endless stimulus to keep it going. Governments and financial institutions just can’t afford a hike in rates. Financial institutions can’t because their customers are already buried in credit and mortgage debt. And governments can’t, because they can’t afford to pay higher interest charges on their debt.
Interest rates historic lows
With interest rates so low, the question then becomes where should investors put their money? Recently Citibank announced that it’s premier savings account would pay 0.01 per cent interest. Clearly, no sane investor would want to keep their money in cash anymore. And so, once again, investors are fleeing to other places to preserve and grow their wealth, like precious metals.
For people saving for retirement, it’s tough. They either have to risk their money on the casino that is the stock market. Or they have to accept pitiful returns on their savings accounts.
One option right now is a silver IRA. These individual retirement accounts are linked to the price of silver and not reliant on interest rates. What’s more, precious metals have had a good run over the last fifteen years or so. Back in 2000, metals had hit a bottom, relative to the stock market. But since then, they’ve been rising considerably. Gold, for instance, went from around $300 per ounce in 2000 to over $1800 per ounce in 2011. When the economy began to stabilize in the years after 2011, the value of gold took and hit and money went back into stocks. But the fundamental reason why people bought gold and silver in the first place remains to this day.
Most investment advisors are getting savvy to the end game when it comes to interest rates. They realize that the government probably can’t ever raise interest rates. And that means that things are looking bullish for gold and silver in the long run.
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