The One Investment Strategy You Need to Know to Protect Yourself Against the Coming Inflation Monster
April 23rd, 2012
The Inflation Monster Cometh, Prepare Yourself
by Tom Chatham
Let’s just take a quick review of the situation as we know it. The real inflation rate is over 10% and the real u6 unemployment rate is over 22% according to Shadowstats.com. General Mills recently reported that their input costs rose from 10% to 11% year over year. This is no shock to anyone that goes to the grocery store every week. The Baltic dry index, the measure of shipping rates worldwide , dropped over 65% between Nov 2011 and Mar 2012. This means a lot of cargo ships are sitting around with nothing to do. The housing sector is still in shambles and will take at least a decade to work off the Millions of foreclosures on the books and the millions about to be added in the next few years. This means the price of houses will continue to fall for the foreseeable future so if you decide to buy please do some research and go into it with both eyes open.
Recently the BRICS countries held a meeting and agreed to conduct more commerce in their own currencies instead of U.S. dollars. Iran is selling oil for anything but dollars. Saudi Arabia is building a huge new refinery in cooperation with China on the Red Sea. It is estimated that there are about $700 Trillion in derivatives in the world banking system. This is over 10 times the World GDP. This is insane.
So why is it a bad thing if no one wants to use our currency to do business? The Dollar is the world reserve currency. This means that all major commodities in the world are priced in Dollars. If someone wants to buy oil or grain they first have to exchange their currency for dollars to make the purchase. Because of this many foreign banks keep a large supply of dollars to do business. The only one that can print Dollars is the U.S. so we don’t need to convert anything to do business. That means we don’t need to have a lot of exports to make money to pay for stuff, we can just print all the money we need. This is exactly what we have been doing for decades. It has worked so far because foreign banks needed the money for their own use , but we have come to a point that there is too much money. The more money that is printed , the less each dollar is worth. Other countries are tired of losing buying power because of this so they are deciding to use something else. This means all of that U.S. money that is sitting in foreign banks is about to start moving back to the U.S.