Investors should avoid investing in sovereign bonds and holding onto cash in an environment of monetary destruction. The increase in the money supply leads to persistent inflation, which erodes the purchasing power of the currency. This inflation is a deliberate policy by governments to disguise fiscal imbalances and transfer wealth from deposit savers and wage earners to the government.
Inflation is essentially an implicit default by the currency issuer, indicating a lack of solvency and credibility. Governments utilize inflation to expropriate wealth from the private sector and maintain control over economic agents. The traditional 60-40 portfolio is ineffective in such an environment, as government debt and unfunded liabilities continue to rise, burdening the productive economy.
The massive debt and unfunded liabilities in countries like the United States and Spain pose a significant threat to the economy and currency purchasing power. Central banks are looking to implement digital currencies to enhance control over monetary policy and eliminate the limitations of current quantitative easing programs.
Gold has outperformed bonds and equities in recent years, reflecting the impact of currency destruction. It is crucial for investors to recognize the value of gold as a hedge against inflation and currency debasement. Staying in cash or investing in government bonds may pose risks in the current economic climate.
Overall, gold remains a viable asset for protecting wealth in the face of government policies that erode the value of traditional currencies. Investors should consider diversifying their portfolios to include assets like gold that can withstand the challenges of inflation and currency devaluation. Can you rephrase this sentence?
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