Inflation is Coming

June/01/2009 18:53PM
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Despite any reassurances you see or read, inflation is coming. It is inevitable. The die is cast.

We have to borrow $2 trillion between now and the end of 2009. No one wants to buy our debt. Hence, the Treasury is buying our own debt. How? By printing more money. The more we print, the less the dollar is worth. To attract buyers interest rates must be higher. As the rates of new issues go up, the owners of existing issues sell.

Government revenue is going down at an alarming rate as more taxpayers are unemployed and those who are employed are making less and paying less taxes. Government spending is going up. There is a discussion in the House to levy a 25% Federal sales tax. This would be used, not to pay off debt, but to finance universal health care.

The media and the government may brainwash us into believing everything is OK, but the rest of the world gets it. They see what is happening and want no part of investing in what was once a secure and safe haven for parking money. Today, the Chinese laughed at Geithner and Pravda wrote about us becomming the old USSR.

Cities and states are in bad straits. Some states, not all. The states that put Obama in office are all in bad shape. California, which said recently that they didn’t need or want a Federal bailout, now says all they want is for the Federal Government to guarantee their debt. So, you as a taxpayer will co-sign for the irresponsible spending in California. This guarantee will further weaken the dollar.

There will far more government spending needed before the end of the year. More banks will fail. President Obama said in a speech that “we are out of money.” No kidding. That was said as a joke. But, behavior suggests he is indifferent to the problem. California was indifferent to their problem.

When the inflation hits, it will hit harder than the mortgage meltdown. It will take more dollars to buy oil. The rest of the world will not sit by and watch our government inflate dollars to reduce the number of dollars needed to repay our debts to our foreign debtors. The first hint of inflation hit last week when interest on T-bills jumped.

Obama, Bernanke, Summers, and Geithner have never worked in the private sector. They are clueless to what the end game is in all the indiscriminate spending. They really believe they can keep a lid on inflation. They are wrong.

This is the Jimmy Carter years all over again. I lived through that. I saw how it unfolded and I’m seeing it all over again.

If you are an investor, you need to inflation proof your portfolio as best you can. It’s coming and you can watch your assets take another hit, or you can take action and protect yourself.

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