Do you remember what it cost to purchase an ice cream cone when you were a kid? For me, it has almost quadrupled in price. Isn't that amazing? Let's take a look at how this type of thing happens, this thing called inflation risk.
Well, in 2007, the monetary base for the United States was about 1 trillion dollars and this monetary base has quadrupled to 4 trillion today. According to www.huffingtonpost.com, "the monetary base (currency, coin and bank reserves) rose from $800 billion in August 2008 to $1.9 trillion in November 1, 2010 (2.3 times larger)." As of Dec 2013, according to www.bloomberg.com, "Chairman Ben S. Bernanke has raised assets from $2.82 trillion before the third round of quantitative easing began in September 2012 and quadrupled them since 2008 to attack unemployment after the 2008-2009 recession."
While different economists have different explanations, my belief is that our dollar will soon be worth one quarter of what it is worth today. According to history, inflation rate in the US has been 3.22% since 1913, according to inflationdata.com.
So, keeping your money in your checking account will lose roughly 3.22% per year.
This post was reposted from http://finlit.biz/retirement-2/what-is-inflation-risk/, originally written on March 30th, 2014.
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