Gold Investment Directory

Posts Tagged ‘Power’

CRAZY NUMBERS

With an additional $9 trillion filtering into circulation between 2008 and 2016, the United States economy will suffer a series of dreadful blows not seen since the spooky Nixon and Carter years.  In a panicked attempt to keep our economy from imploding, Bush and now Obama have opened the money gates.  With spending bill after spending bill getting passed, Congress has initiated a dollar-splitting campaign that will eventually deteriorate the buying-power of the American people.

KILL THE DOLLAR

Inflation increases the cost of goods and services and simultaneously decreases the value of debt.  So, in one fell swoop, our government plans to diminish its own debt and your debt by reducing the value of the U.S. dollar.  This is the ONLY way our government can overcome its financial obligations, pure and simple, other than fiscal responsibility, which, of course, is an impossibility.

EXPECT THE WORSE

How do we peons use this to our advantage?  Listen closely, because only you care about your money.  I will give you four simple moves you can implement to combat the future inevitable inflationary times, but first some history.  Do you remember the financial crisis of the 70’s?  Who does?  That was over 35 years ago!  Our Treasury, Federal Reserve, and Congress faced deep recession.  They began to spend like crazy and it resulted in runaway inflation.  We saw the dollar lose 60% of its value from 1974 to 1983, only 10 years.  To put that in perspective, let’s look at 1989 through 2009, the latest 20 years.  During this time the dollar lost 70% of its value, basically half the rate of the 70’s.  What can we expect going forward?  Are you sitting down?  I’ll tell you; expect it to be worse than the 70’s, much worse.  Expect the next 10 years to reduce the value of the dollar by 75% or more.  Here is how you can prepare:

WHAT TO DO

First: if you are conservative and want less hassle and commitment, buy United States Inflation Protected Bonds.  They are sold by brokers and financial planners.  These bonds are unique because they carry a stable coupon rate of 2 or 3% PLUS an additional interest rate equal to the increase in the core consumer price index or CPI.  So, if we experience an inflation rate of 7%, you may earn a coupon rate of 9% or similar.  Not bad.  This might be a good play for some of your loot.

HOUSE OR NO HOUSE?

Second: consider buying a house if you have yet to do so.  If you already own one, maybe a sweet upgrade makes sense, especially in this market.  Housing prices have historically risen in lock-step with inflation, but not always.  During the 70’s, home prices rose almost 150%.  Cha-Ching!  Why does housing climb when prices go up?  Simple.  Housing represents all there is in an economy: labor, materials, insurance, land, lending, professional services, etc.  So it has a strong correlation to the rate of inflation.

FROM THE GROUND

Third: look at commodities.  Inflation has a natural link to what comes out of the ground.  Since natural resources are theoretically finite, it makes sense that a falling dollar causes their values to rise.  When it takes more money to buy the same resource, the owner of that resource benefits from its price appreciation, and the buyer pays dearly.  So, my wonderful readers, who do you want to be – the buyer or the owner?  Another Cha-Ching!  You want to own commodities like gold, silver, steel, land, soybeans, cattle, and corn.  Commodities are tricky, so get good advice.

INCOME, INCOME, INCOME

Fourth: own investment income property.  Investment property is often purchased with borrowed money.  Borrowed money, or debt, will be devalued with inflation.  For example, doesn’t an old mortgage balance or monthly payment look puny over 10 years or so?  This is what I mean.  When inflation over time increases the value of assets, it does not inflate debt.  Instead, the debt stays the same dollar amount or is reduced with principal payments.  So, with these factors in place, the investment income property’s equity grows nicely in an inflationary environment in two ways; asset growth and debt reduction.  You can buy property outright locally or through an Investment Trust.  I help clients do this every day.

LET’S GET SERIOUS

So there you have it!  A few clues to how you can get a little richer with the Obama Administration and his inflationary fiscal policies.  It takes a little commitment and a whole lot of clams, so if you are serious about your future, this may be your last opportunity to protect your buying power.