Bonds offer a fixed yearly income based on a fixed interest rate that never changes for the life of the investment. When you own shares in a bond fund you own a small part of a large portfolio of these income producing securities, which trade in the open market like stocks do. Your total return from bond funds includes both interest income and gains or losses in the value of the securities in the portfolio.

This first sector is investing in a business. One way to invest in a business is to purchase stock in the company, assuming that it is publicly traded on the stock exchange. Each investor, or stockholder, has some say in the operation but how much say depends on the percentage of total stock they possess or control. So unless you are in position to buy up a majority of a company's stock you will have to trust in the skills of the company's managers to make you a profit.

Deflation is a general decline in prices, income, and credit. Right now we are seeing all three. For the last twenty years we have spent a dime for every nickel earned, and to do this we borrowed. We came up with things like "teaser rates," and "liar's loans," and "ninja loans," and that's just in housing. To accommodate all this new borrowing, the shadow banking system sprang up, satisfying our thirst for more credit, more debt.

Another reason to invest in gold is because this is the best way to get rid of inflation. Every time life proves to be extremely difficult, the price of the yellow metal goes higher and higher. Continuing the list of reasons, another one would be deflation. During deflation, economy has a slower pace, business does not develop with the right speed, so gold is needed again for a safe investment.

Shilling brought to light the fact that consumers account for 70% of spending in the U.S. economy. Because of tight budgets and lower incomes, those consumers are pulling back their spending and deciding to save instead. As a result, Shilling says the economy will only have a 2% growth and people should put their family investments in long term savings.

Therefore, the best thing to do is to buy gold in the cheapest form. As a rule, the cheapest ways to buy gold are bars, krugerrands or sovereigns. Of the three, gold bars can often be obtained at the lowest percentage premium followed by krugerrands and gold sovereigns. Stay away from gold coins since they cost a lot but their value is debatable.

For most of us, currency is the epitome of value: when keeping it, capitalizing on it or exchanging it for other values such as goods and services. Unfortunately, that is nearly over now, and a strong driver of the present crisis. Governments gave up the gold standard in favor of this mundane value, have overprinted money for decades and this monetary craze brought us here, in full-swing crisis.




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