There appears to be a battle at the moment between inflationary and deflationary forces.

We're getting mixed messages from economists and policymakers - should we be worried about inflation or deflation?  While there is still short-term uncertainty, in the medium to long term the threat of inflation is very real.  When it comes to protecting your wealth throughout retirement, today's inflationary conditions are not that relevant - what matters is what inflation will be over the next one, five, ten and twenty years.  
Inflation may currently be low, but most commentators believe that it is set to rise to high levels as a result of economic stimulus measures around the globe.   
There is another element that could contribute to higher inflation in the future - the rise of Asia.  US political commentator, Kevin Phillips, advises that: "the rise of Asia - approaching 60% of the earth's population and on the cusp of a plurality of world wealth - is realigning global economics and political power.  The history of such great realignments is inflationary."  According to Phillips global inflation is about to renew, with the rise of Asia playing a larger part than the massive money expansion.   
The consistent hallmarks of an inflationary environment are higher petrol prices, higher energy bills and higher food cost - items we spend money on every day.
But there is a positive side - it is possible to take advantage of the global trends to inflation-proof your wealth.
According to International Monetary Fund estimates, China is the single country that contributes most to global economic growth.  If China and India maintain their current growth rates, they will join the US as the world's largest economies by 2025.
Developing countries represent 75% of the world's land mass and over 80% of the global population.  Their population is expected to grow five times as fast as developed countries.  By 2030 more than one billion people will join the ever increasing consumer middle class.   
All this creates a huge increase in demand for food, clothes, housing, water, energy etc.   
Forecasts suggest that agricultural output needs to double by 2050 to meet total demand for food - but will that be possible at a time of land and water shortages caused by the rising population?  In Asia the diet has shifted from grain to protein - and producing protein takes up much more land than grain.  All this puts pressure on food prices.  
Then there's the ongoing massive infrastructure build in developing nations - water supply, bridges, roads, energy, factories, houses etc - creating rising demand for commodities.  As the global economy moves towards growth, commodity prices are likely to increase.
Commodities usually increase in price in years when inflation rises.  The supply situation for many commodities is tightening due to a variety of factors, which could make them more expensive - bad news for consumers but good for investors.  Commodities, along with other real assets like equities, property and fixed interest investments, provide an effective hedge against cost of living rises.
All these are long-term trends that will take years to play out.  This is an ideal time to consider investment strategies which take advantage of these global themes and protect your wealth from inflation.  Speak to an experienced financial adviser like Blevins Franks to establish what opportunities are available and whether they are suitable for you.
To keep in touch with the latest developments in the offshore world, check out the latest news on our website www.blevinsfranks.com
 by Bill Blevins, Financial Correpondent, Blevins Franks 

Appears in edition 385 Tenerife News