...but those will be a couple of the only positives in America in the years to come.
Unless we are prepared we will not be able to afford the things we need much less what we want! I can get into the causes of it as much as you want, but no matter what happens the dollar will have horrific inflation and will become more and more worthless. I need to express to you what that means because it has huge implications that many of us have never felt, and there ARE strategies to survive it.
Inflation is basically extra currency in the market chasing the same amount of products, so the prices for everything rise. You may be thinking- "Who cares? If we have more dollars, what does it matter? Price is just a number." Sure- that would be so if we were the only country using the only currency. It wouldn't matter, but the flood of dollars that will be coming back into the American market will represent foreign lands cashing in our debt due to our massive trade deficit. Because that trade deficit is now so high and our debts to foreign central banks are so high, these countries will not be willing any longer to hold the dollars, and they will start purchasing in our local economy with extra dollars driving up our prices for food, commodities, precious metals, oil, consumer goods, raw materials, etc.
Your wages will not rise along with this because we don't produce anything here. 70%of our GDP is just from servicing ourselves. The important production jobs are outsourced to foreign lands now, so the wages here won't rise very much along with the inflation. Plus, asset values won't rise here like the commodites and food because the local assets like real estate aren't international products with demand anywhere and in any currency like food and commodities. So, what we are actually going to have is Stagflation, which is inflation of prices to pay for stuff we need and stagnant prices for assets that would normally offset the inflation a little by giving us a little wealth.
Stagflation, as you now see, is the worst possible scenario, unless we get Hyperinflation. This Stagflation scenario is actually worse than the Great Depression, which simply had depressed prices, wages, and production. There was no inflation in that case.
Those of you who know me have probably heard me mention as far back as three years ago that another Depression is inevitable because of the trade deficit, our irresponsible government, and going off the gold standard, not to mention the 50 Trillion dollar Ponzi debt of Social Security, and the retirement of the Baby Boomers. So, the massive trade deficit and debts that I mentioned have been very treacherous for quite sometime. The economic crisis we're having now is a definate result, and the bailouts(printing of more money) have fortified the outcome. See, when we allow the government to give itself 800 Billion dollars, it simply prints a bunch of IOU's(Treasurey Certificates) and sells them to these countries that have Billions of US dollars from all their exports to us. Sometimes our government just gives the Treasury Certificate to the Federal Reserve and they simply roll the dollars off the printing press in return. Both instances add dollars to our market.
We're sitting on a mountain of debt and our solution is to do our best to add more. This is why the financial markets are collapsing. We have too much debt, and even though these exporting governments have a ton of dollars, they know we are not as credit worthy anymore, so everything is grinding to a hault. We have been making money out of thin air for the last 35 plus years, and now all that debt cannot be increased anymore because we are not credit worthy, so let the inflation begin. WooHoo!
This is bad news. Its not a normal situation. There is no bounce back, not for a long, long time. However, knowing what will happen can enable you to still invest and prosper.
1) Do not put cash into dollar denominated assets unless you are borrowing dollars so you can invest in foreign currency denominated assets. FYI, the American stock markets are dollar denominated assets. Get your money the hell out of these markets, unless you're making short term trades. It doesn't matter if you get 8% back this year if inflation devalues it 10%.
In an inflationary environment its actually good to be a debtor. Thats one of the big reasons America continues to borrow- because there is already so much hidden inflation(now 9%), and coming inflation. See if you borrow $100K now to be repaid in ten years, that is a hell of a deal in this environment because that $100K ten years from now will have lost more than 50% of its value(So, in the future you would be paying back only $50K in terms of value). Thats right- the dollar is going to be that worthless- 50% is a rock bottom minimum for how much the dollar will be stripped.
2) Do not buy life insurance for the reason above. Because of inflation the death benefit will lose a ton of value. If the death benefit is to be $500K, and the death happens in ten years, the beneficiary will be able to purchase something worth maybe $200K in present terms. Invest in these insurance companies though because most of their customers will not be savvy to what I'm saying here. Insurance companies are basically debtors, and like I said debtors do well in an inflationary environment. Especially invest in insurance companies that are taking the dollar denominated debt and buying a large percentage of foreign assets and currencies. WHY DO YOU THINK THE FED BOUGHT AIG? NOW THEY OWN THE LARGEST INSURANCE COMPANY IN THIS COUNTRY! SO NOW THEY CAN MAKE MONEY OFF INLFATION COMING AND GOING!
3) Do not invest in products that claim to have inflationary offsets. These products are indexed to the CPI(consumer price index), and those numbers are completely manipulated by the unaudited Federal Reserve. So as the American government wants inflation because its the largest debtor in the world, it also wants to hide it because its the largest debtor in the world. If these foreign investors saw what our real inflation was they would be unwilling to loan us money and would want higher rates. The CPI numbers that the Fed puts out are a crock. They don't even include food and energy in the inflation numbers because they say they're too volatile, but at the same time they use a 12 month trailing inflation number. Well, doesn't the trailing factor eliminate the volatility issue already? Thats their reason for using it, yet they only use their "core" inflation numbers to cut out volatility as well. Well, those prices that The Fed cuts out will be the most inflationary numbers in this environment.
Plus, when housing prices started going up, they took out sales values and used equivalent rent values. If you know anything about real estate, you know that when sales go up, rents go down. So how devious was that maneuver to keep their CPI lower? Also, the Ponzi scheme we call Social Security has pay-outs that are indexed to CPI. The government reeaally wants the CPI to be low. So, yeah- real inflation right now is going at 8-10%. As I'm writing this my dollars are becoming more and more worthless, but my wages are staying the same. The bailouts will make it accelerate rapidly.
4) Do not be fooled by lower taxes. They will lower taxes to stay in office because things are so bad, but they are taxing us much, much moreso with the hidden tax of inflation. If they print money, its just like a tax. When they print more dollars it devalues all the money, and they Fed makes interest on those IOU's they gave out to print the dollars. That is their hidden tax. Oh, and the money goes straight in their pocket, by the way. The Fed is a private entity that has never been audited and is completely above the law. Look it up! They would actually rather tax us this way because it goes to their hidden coffers rather than have to account for normal tax money.
5) If you don't want to get completely out of the American stock markets for some reason, at least invest a huge percentage in commodities; gold, oil, cotton, corn, silver, copper, etc. They are cheap now because all the world markets have been temporarilly hit by our crash, but the foreign markets will rebound and commodities will continue the bull market that was just beginning before our crash. There are about ten solid reasons why gold especially will sky rocket, even from what seems high at $1000 an ounce.
6) Even if you choose to stay in the American markets, make sure you're investing in foreign stocks. They're down right now because they have been tied to the American market, and also the US dollar has been the world's reserve currency. That will not be the case at some point soon. Invest in Canada, China, Japan, Australia, etc.
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