There is a tsunami of inflation building up on the horizon but still most of us, rattled by the fire sale of assets and collapsing prices last year, languish in deposit accounts. Fear is the overwhelming emotion now, fed ever  more by dire statements about the public finances, job losses and the glaring vacuum in political leadership. We’re saving like never before and, on the surface, that’s good because a paltry 1% on deposit is still giving real growth above inflation of 8%. How bad is that? 

Well, very bad if you continue to try to hold the real spending power of your stash in cash and very high inflation comes next. That’s because in a short period you could lose a huge chunk of your money to inflation. So why is high inflation looking inevitable despite Ireland’s current deflationary bout and what can you do to prepare? 

• Oil prices are beginning to rocket again as global production plateaus but demand rises on economic recovery. Oil prices, having risen fivefold since 2000 to their their watermark in 2008 collapsed but are now back to $80 a barrel. Expect prices to breach $100 next year and to rise further thereafter.
• Commodity prices across the board are rising, copper, silver and gold. Short of hitting readers with a gold baseball, I’ve been shouting about gold now for four years over which time its risen from $400 per ounce to $1,145 yesterday. Silver’s relative price to gold is at very low levels and responds very strongly to inflation as well so expect silver to follow at some stage.
• The world reserve currency, the Dollar has returned to trend, that’s downwards, as the US Government turns on the printing presses to stave off a US depression and continues to follow a weak dollar policy. Meanwhile foreign buyers of US Government debt are beginning to desert the dollar as a store of value. The Indian’s just bought 8% of the world gold reserve from the IMF. It’s just the beginning. More will follow.

Whichever way you look at it, high inflation is coming next, so what should you do to prepare? Social welfare payments will be inflation adjusted if the Government wants to avoid street riots but  savers should keep no more in cash deposit than is necessary. That might mean one year’s cost of lifestyle if you’re in work or three years if you’re retired. The rest should be going into inflation-linked European Government bonds with some allocation to precious metals. Unlike common Government bonds these index-linked types move with inflation and their capital values are likely to rise as the language of inflation gains common currency next year. There are two fund providers in Ireland, Standard Life and Friends First. Gold can be acquired by investing in Perth Mint Certificates, by investing in a gold fund through a stockbroker or by investing with a life office like Zurich Life. There’s plenty of options, but, whatever you do don‘t ignore this alert and get caught napping a second time – first by the property collapse and second by inflation. 

Eddie’s book ; Energise, how to survive & prosper in the coming age of scarcity, high inflation and peak oil is available as an e-book from www.eddiehobbs.com. All profits go to the Jack & Jill Foundation.