I am thoroughly convinced that they’re smoking something in Washington. After all, the pundits by the Potomac keep dishing out these absurdly low inflation figures, thinking you’re too dumb to realize they’re full of it!
Case in point: Last Friday’s Consumer Price Index (CPI) data. The so-called “core” inflation rate rose a modest 0.1%. So every politician on the Hill plus all the idiot Wall Street analysts grabbed onto that figure and proclaimed inflation “dead.”
Inflation? “Not a problem” … “tame” … “easy to deal with” — those were some of the comments and headlines that came out after the figure was released.
Give me a break! No, give us all a break. Anyone with half a brain in their head can see that prices are going up all around them.
Here are just some recent examples of price rises since the first of the year …
- The price of oil is up 23%
- The average price of a gallon of unleaded gas is up 37%
- Soybean prices are up 26%
- Wheat prices are up 18%
- Corn is up 6%
- Uranium prices are up 91%
- Copper prices are up 29%
- And lumber prices are up 8.4%
Now, you tell me, is that 0.1% inflation? I don’t think so! The average price appreciation of the above, which are pretty much staple items, is 29.8% … just since the first of the year.
That matches up with the action we’ve seen in the Commodity Research Bureau’s Index of 23 widely-traded natural resources and commodities. According to the index, prices of raw materials are up nearly 30% since the first of the year.
At these rates, you’d see prices rise almost 60% by the end of the year!
You can see why I’ve about had it with the people in Washington and on Wall Street that buy into the “no inflation” scenario. I mean, are they living on another planet?
Look, tuition at the average four-year college jumped 6.3% for the 2006-2007 school year. The cost of a first-class postage stamp increased 8% this year. Property taxes, insurance premiums, and a whole slew of other items are jumping like crazy. Heck, my lawyer just jacked up her fees from $350 to $400, a 14% hike!
Meanwhile, the value of those U.S. dollars you get paid in … you invest in … you save in … are going, down, down, down! That just means even more inflation is coming down the pike!
So I urge you — no, I implore you — do NOT buy into the low inflation B.S.!
If you do, the money you’ve worked so hard for will disintegrate right before your eyes. It will crumble in value, just like the U.S. dollar is doing right now …
The U.S. Dollar Now Sits
On the Edge of the Worst
Currency Crisis of All Time
There have been dozens of currency crises over the last several hundred years. But until recently, currency crises were confined primarily to either emerging third-world economies or fascist political systems like Germany and Italy in World Wars I and II.
Now, the currency of the world’s foremost superpower is going down the toilet. That’s right — the U.S. dollar is in complete and utter shambles.
I’ve given you plenty of reasons why: Trade deficit problems, budget deficits, trillions in national debt, a paralyzed Federal Reserve, etc. And now the greenback faces another giant threat …
The misinformed politicians in Washington are about to stage an all-out war against China’s currency.
If they prevail, they are going to single-handedly derail the global economy, and send it reeling into a recession that will be accompanied by even MORE inflation!
This slew of politicians in Washington want to erect trade barriers and tariffs against China. They want China to substantially increase the value of its currency.
But mark my words, this will do nothing to help the value of the U.S. dollar. All it will do is create an international trade war. Yes, it would push the value of the Chinese yuan up, but it would do so by pushing the value of the U.S. dollar down further.
China will remain a competitive industrial producer, and its economy will roar ahead. Meanwhile, we will see a slowing U.S. economy with an even weaker dollar and negative GDP growth.
We’re almost there now. First-quarter GDP in the U.S. was 0.6%. If you take a conservative measure of the real rate of inflation, say 5%, then you’re looking at an economy that is CONTRACTING in real terms (.6% GDP growth minus 5% inflation = negative 4.4%).
That’s not pretty. Toss in any number of potential shocks — a protracted decline in real estate, a hedge fund or derivatives disaster, or an exodus of foreign investors out of U.S. bonds — and look out below!
You’d see the worst of all possible combinations:
- A plunging dollar
- Even slower U.S. economic growth
- Rising inflation
- Rising unemployment
- A crashing bond market
- A rout in the stock market
- And more!
I hate to even think about it. But the prospects of this happening are now way too high. So it’s time to make sure you have your seatbelts fastened because the ride is going to be wild and dangerous.
Please Take Steps
To Protect Yourself!
If you have not already done so, consider the following …
First, keep the majority of your money LIQUID! Don’t get stuck in illiquid investments right now, especially bonds and real estate. Stay away from long-term government, municipal, and corporate bonds as well.
Second, keep your emergency funds SAFE! In my opinion, money market accounts, especially treasury-only money markets, are one great place.
Third, keep the bulk of your investing money in REAL WEALTH! I’m talking about companies that specialize in tangible assets such as gold, oil, base metals, and foods.
They give you great inflation hedge protection … insulation from a falling dollar … while at the same time keeping you invested in virtually the only sector that is relatively immune from declining demand in the U.S.
That’s because the rise of India and China — 2.4 billion people — is creating more than enough demand for natural resources.
So much so that prices for almost all natural resources keep trucking higher. I think there’s much more upside in gold, oil, copper, agricultural goods — you name it.
For specifics, definitely see my Real Wealth Report. The June issue is already out, with updates on all portfolios — plus an interesting read on why you should not invest in Russia at this time.
Best wishes,
Larry
P.S. If you’re not yet a Real Wealth subscriber, order online now!
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