Robert Kiyosaki "Savers Are Losers"

Negative Real Rates Explained


With inflation soaring to at least 8% in 2022, depending on who you believe, is it feasible to keep your cash stored in a bank account earning 4% or less? John Williams of ShadowStats.com makes it clear inflation is much higher by about 50%, bringing the actual inflation rate to 12% or higher.

Why is there confusion in what the real inflation rate is? John WIlliams is an expert in the subject and proves the government (in the USA at least) is fudging the numbers by regularly changing their rules when calculating the inflation rate. The 'official' CPI is just below 8% but when adjusting to 1990 calculations, the inflation rate jumps to over 12%. It's even higher if you use 1980 calculations.

In 2022, The U.S. and Canadian central banks have aggressively pushed rates to 4% through several rate hikes since last spring. It takes 6 to 9 months for the full effects to be felt, so we are just feeling the impact of the first rate hike. How are things going to be by next summer.

Interest rates are going higher. They might slow down the rate of increases but mark my words, rates are going up.

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As Mike Maloney of GoldSilver.com explains in a recent video, rates have to go higher than the official (or unofficial) inflation rate to even begin to cool inflation. He believes it is likely they'll push interest rates to at least 16% to tame inflation. In his own words: "Fasten your seat belts and brace for impact".

This is very reminiscent of Paul Volcker's double digit rate increases seen in the late 70's and early 80s.

So while you might think you're getting a good deal parking your money in a bank account for a year at 4%, you will actually have lost an additional 8% (or probably higher) of purchasing power when you go to cash out as the inflation rate will have been much higher that the interest you'll be paid.

Welcome to negative real rates. As Robert Kiyosaki, author of "Rich Dad, Poor Dad' has often said, "savers are losers". He'll say you're better off parking your wealth in a real asset that produces something, such as a farm to produce your own food or a business. He explains that owning a house is not an asset as it produces nothing and you're paying interest on it if you carry a mortgage, the very definition of a liability.

Kiyosaki has stated that silver is one of the best hedges against inflation as it has huge potential to rise in value. At present, it is wildly undervalued at just $22.50 per ounce with an approximate 80:1 ratio against gold. Historically, the ratio has been at about 15:1 but since silver has been used so much in industry in the last 100+ years that it's more likely the real ratio is 10:1 or less, making silver the investment (insurance policy) of the century!

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So is it good to park your cash in a bank account? The answer is no. It's best to wait until interest rates are well above the inflation rate. In the meantime, a very good place to park your wealth is in silver bullion.

Some will say, "buy gold" which is certainly not bad advice if you're uber wealthy. My recommendation is to focus on silver. When silver finally explodes higher and it will, you can exchange for gold bullion for a much lower cost as the silver to gold ratio plunges. It's a good time to make the switch to gold when the ratio hits 20:1 or less.

Negative real rates are a form of taxation on the people. Are you getting tired of it yet? I am!

Update: Dec. 4, 2022: New interview on KingWorldNews with James Turk. He states pretty much the same points I mention in this post. Click here to listen in on KingWorldNews.

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SweptOverNiagara
SweptOverNiagara

Name's Joe and I live in Ontario, Canada. I enjoy keeping track of markets, investing and commodities, primarily gold and silver. Also have interests in the crypto sector. I Support BAT's Brave browser on my phone and earn free BAT tokens.


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