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The Currency War And Its Effect On Investment Property

by Jason Archer

The war on your currency has been raging on for years now. You probably did not even know such a thing existed unless you find yourself paying close attention to the currency markets.

At its most basic, when a country finds itself in fiscal trouble, the central bank and/or the government of the country in question will generally devalue their currency.  They want this devaluation because they are able to sell their exports more readily.

Say for example you are Country X and you have a currency called the X dollar. You need to purchase coal to power your energy grid and you can buy it from Australia or or from Canada. Assuming all other costs are the same, you would probably purchase the coal from the country that had a weaker currency than your X dollar. So if the X dollar bought you more coal from Canada than from Australia when you did your currency conversion, you would buy from Canada. This is an oversimplified example of course, but the principle is the important part: You are more likely to spend your money where your money has the most purchasing power.

The problem with the devaluation of currency if you happen to live in the country doing the devaluing; like the US for example… Is that it creates higher prices through inflation. For example, a truckload of building materials costs more dollars. The energy used to transport those materials, the labor used to bring those materials to market, and the manufacturing of a new thing from those materials becomes more costly.

Many of the investors I now follow have been warning about the effects of massive money printing or “Quantitative Easing” and their effects on the economy for years now. I encourage you to learn more about Jim Rogers, Peter Schiff, and Robert Kiyosaki or spend some time studying Austrian economics in order to protect your wealth.

One of the primary reasons investment property in places like Arizona has become more attractive of late is because it offers not only rock bottom pricing at today’s levels, but because it is a wonderful hedge against the effect of inflation on your purchasing power.

In general, as inflation creeps into the monetary system the prices of real things go up. We are currently seeing this with commodity prices all over the world. What investment property do you know of that is not made of commodities? Wood, stone, copper, and steel go into every structure out there!

When the prices of those things go up, the prices of homes go up over time. So, buying an investment property in this climate is a wonderful way to protect your purchasing power against inflation over time. Further, purchasing a cash flow rental can give you cash flow while you ride out the effect of inflation on home prices.

In the end, having a cash flow investment that will appreciate with the coming inflation gives you the best of both worlds.

You can read more about investment property in Arizona here.

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