What happens to the value of money during inflation?

Answer 1

Gold and silver go up during inflation. So it is a good hedge during inflation. Inflation defined as "an increase in the money supply" rather than an "increase in prices."

In some currencies, the price of gold could be steady, while in others, the price of gold could be moving higher. At present, 2008/2009, the price of gold is moving higher versus all currencies. If you go to kitco and scroll to the bottom you'll see gold priced in all currencies. Look at the 10 year chart for each currency and see how the price of gold has increased. This is as a result of inflation.

If you look at prices of silver and gold versus the U.S. dollar long term, you'll see that when the price of the dollar goes down, gold and silver move higher and vice versa. Since the year 2000, the average price of gold and silver have been increasing in terms of U.S. dollars.

The fact that the U.S. (and other countries) are adding debt to debt is not going to resolve their economic crisis. If you have a credit card that has $10,000 of debt and you double your debt, are you anywhere closer to resolving your problems? No.

Another way of looking at it, is if all the money in the world bought all the goods of the world, and you doubled the amount of money, are the inhabitants any wealthier? No. It just will cost twice as much for the goods. Gold and Silver are the hedge that is needed to protect your wealth.

Answer 2

The value of money goes down.

"During periods of inflation the value of money goes down because each dollar actually buys less."