Signs of inflation can already been seen, with food prices increasing just in time for the holiday. In terms of food, prices are expected to increase even faster in 2011. When the market crashed in September 2008, prices were knocked down due to uncertainly. The economy is now beginning to recover, increasing demand. Rising fuel costs add to the issue and increase wholesale and retail prices.
Price increases are not predicted to be limited to food. As the economy attempts to gain solid footing, demand for products will increase and those in limited supply will experience rising prices. At the same time, the value of the dollar is falling, meaning that one dollar will buy less product and with prices increasing, it will buy even less than in the recent past.
As the government continues to pump money into the economy to revitalize it, the value of the dollar will decrease. A booming money supply means rampant inflation, despite the tough talk by central bankers. Some believe that ever since the gold standard was discontinued, purchasing power has been severely limited by paper currency.
One way to protect paper money during times of inflation is to buy gold coins and other commodities. As inflation grows, the value of money decreases, causing whatever we earn today to get us only a small fraction of what we will consume in the future. The only way to increase our assets and help rectify the situation is to have a diverse portfolio that includes commodities.
Some experts predict that inflation will overtake falling prices entirely by next year. The government desires inflation so investors should be prepared and add commodities like gold to their portfolios. Let the dollar do battle with inflation and rely instead on gold and other commodities to protect the value of assets.