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Best Inflation Linked Bonds and Savings

By Edited Nov 13, 2013 0 0

If you are worried about potential inflation and currency debasement, it is important you consider buying a good inflation protected bond or starting an inflation linked saving account. There are a couple of other investments you can make to protect yourself from inflation that should also be considered, but these two come first. I invest in many of these myself because I understand the strong likelihood that inflation is coming in my country, so I’ve taken some steps to protect my money if that happens. Below I will be discussing what I consider to be the best inflation-protected investments, and will even discuss some of the best books on inflation that will really open your eyes!

Inflation Definition and the Types of Inflation

So what exactly is inflation anyway? It depends on who you ask - what school of economics they are from. The most basic definition is this: "A general increase in prices and fall in the purchasing value of money."

However, the Austrian school of economics defines inflation as an increase in the money supply, with rising prices are the following results.

Inflation is normal but hyperinflation is basically inflation on steroids. The hyperinflation definition is basically a very fast or out of control inflation - prices start to rise by possibly 200 to 300 percent every single day. Basically people will spend their money or currency as soon as they can because they know that by the next day, it will be worth far less! The causes of hyperinflation are quite complex!

History of Inflation in the United States

You might be thinking, wait a sec. Isn't inflation only 2 or 3 percent currently? Why should I be worried about inflation?

You should know that inflation is very underreported by the government (in my opinion). If you look at the price increases in things such as gas, food at the grocery store or general energy prices, you'll see what I mean.

You must understand that the measure of inflation the government uses excludes these many essential items that we use every day. How convenient! Sites like ShadowStats show the real inflation rate in the US, and it's much higher - more like 7 percent currently. 

The Truth About Inflation in the United States

The real truth is that when a country goes so debt into debt, like the United States currently is, they resort to printing money. This has happened a bunch of times throughout history and will keep happening probably. The result of this reckless action is big inflation - potentially hyperinflation - which leads to social unrest and political upheaval.

National Inflation Rate of the US (What They Report)

Inflation Rate in US

House Price Inflation - Do Home Prices Rise During Inflation?

If you are wondering how real estate performs during inflation, my answer is somewhat complicated. While home prices do in fact increase during times of high inflation, it's important to understand that they could be falling in value at the same time.

For example, if gold goes to $10,000 an ounce in 5 years, and gasoline goes to $15 a gallon and food prices go higher, and your house goes up $50,000 in value - you might be losing value and losing money, even though the price has increased. You must measure value in terms of things other then your countries home currency, and start measuring it in other things like hard assets such as gold, oil, food, etc.

OK, So What to Do About Inflation?

Well the fact that you are here looking for good inflation proof bonds and saving accounts is a big plus! There are several options for the savvy inflation investor here. These are more for people relying on income and preservation of capital, rather than someone looking to make a lot of money.

#1 - TIPS - Treasury Inflation Protected Securities

This is a treasury security that is directly indexed to inflation. The goal is to offer investors protection from the negative effects of inflation.

If you think inflation will be a problem in the near future (which I believe), but don’t want to "risk" your money on inflation investments like gold, oil or other hard assets,  then you are going to want to take a look at TIPS.

#2 - -Series I Inflation-Indexed Savings Bonds

Another safe inflation proof bond, they are sold at face value and you can buy up to $10,000 (face value) in any calendar year. Series I Bonds offer a fixed rate of interest, adjusted for inflation. Like TIPS, you also buy this through the Treasury Direct system.

However, you must know that if you redeem Series I Bonds in the first five years, you’ll forfeit the three most recent months’ interest.  After five years, you won’t be penalized for redemptions.

#3 - Inflation Linked Savings Accounts?

This depends on where you live and what bank you belong to. I have not seen or heard of this type of account being offered yet in the United States, but I have heard of it being offered in the UK.

However, in the US there are still high yielding savings accounts, which are the next best thing.

The two highest yielding savings accounts in the country that I know of are the Ultima Bank, which offers 2 percent annual yield, and the Washington Savings bank, which offers 1.5 percent.

More Aggressive Inflation Investments - Profit From Dollar Debasement!

As you can tell from my signature picture, I like investing  silver. I also really like the idea of investing in gold, oil, farm land, timber investing and other “hard” assets because I think they will outperform all other investments going forward. These are all great alternative investments, in my opinion. How much you want to put in your portfolio is up to you. 

 

 

Best Books on Inflation Investing - Take This to the Next Level

There is going to be a tremendous opportunity to make money in the coming years, in my opinion. The people who make the most money will be the people best positioned to profit from inflation.

I have to mention several books here because they changed my life and how I think about money in general. Without them I wouldn't even be writing this.

Inflation Super Cycle Book

The Great Super Cycle: Profit from the Coming Inflation Tidal Wave and Dollar Devaluation
Amazon Price: $27.95 $3.99 Buy Now
(price as of Sep 29, 2013)
The stock markets and business markets in general run in waves and cycles - every 20 years or so one market greatly outperforms the other.

For example, stocks in the USA outperformed all over investments from 1980 - 2000. However, they are in a bear market currently and will be for at least 5 more years.

Right now, the best thing to invest in is hard assets as they are in their cycle!

This book will teach you everything you need to know about stock market cycles and how to profit the most these next few years.

Best Gold Book Ever

Rich Dad's Advisors: Guide to Investing In Gold and Silver: Protect Your Financial Future
Amazon Price: $68.38 Buy Now
(price as of Sep 29, 2013)
If you are thinking about investing in gold and silver, you MUST read this first. It contains literally everything you need to know about investing in the sector.

While that's great, I actually think this book is more of a book on economics than anything else.

Maloney gives readers a really good economic history lesson and its very detailed - but easy to read for someone who doesn't get economics. That's why I loved this book the most!

Peter Schiff Book

The Real Crash: America's Coming Bankruptcy---How to Save Yourself and Your Country
Amazon Price: $25.99 $13.07 Buy Now
(price as of Sep 29, 2013)
Peter Schiff is without a doubt my favorite economist and one of the most popular of our day.

Schiff is most well known for correctly predicting the housing bubble and crash before it even happened.

This book reveals Schiff's next prediction - a collapse of the US bond market and big inflation. Schiff is an expert and gives great tips on how you can protect yourself and profit in the coming years.

Schiff on Inflation

Silver - Going to $100 an Ounce and Higher?

2012 Silver Eagle in Air-Tite Capsule
Amazon Price: $49.99 $31.39 Buy Now
(price as of Sep 29, 2013)
These books taught me the importance of owning REAL assets like gold, silver and oil.

Many experts like Schiff and Maloney believe that owning silver coins or bullion is the best hedge again inflation.

I believe that holding at least 5 percent of your personal portfolio in gold or silver is a good bet.

I prefer silver over gold because it's cheaper and easier to buy, and I believe it has more upside than gold for this very reason!

Thank you for reading this article on the best inflation proof bonds and saving accounts - I hope I gave you a decent overview of what inflation is and how to protect yourself from it!

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