Prices keep rising, but so does your paycheck. All is well, right? Wrong. The experts behind Aftershock say that inflation is an “already launched missile” headed our way, threatening to pop the already sinking American economic bubbles. Yes, your wages will increase, but not surpassing the rate of inflation or interest rates. Inflation is derived from an increase in the money supply, and the Fed is printing money at an astronomical rate to simulate economic stimulation. In fact, the money supply has increased approximately 300% over the past three years. As a result, world markets are moving toward an economic disaster, and possibly even an economic collapse faster than most realize.
How exactly will inflation lead to economic collapse? Look at the money supply as the glue that holds the market together, creates means to a product or service, and allows the forces of supply and demand to not only function, but to harmonize. When money is printed at such a high rate, an indication that output is increasing is created. Technically, the nominal GDP is increasing, but real GDP is not. If we continue on the current path, the dollar will be worth almost nothing, and food, housing, and other living expenses will rise far beyond what the average American salary can afford.
You would think that with the amount of taxes collected by the federal government, they wouldn’t need to print so much money. Rising inflation is a prime indication of a failing tax system. The government continues to spend at a rate that won’t cover their expenses, and cannot even begin to pay back national debt. Thus, the Federal Reserve is printing more money to create a false sense of wealth and stability, as the cost to print money is extremely low. The American government lacks simple pattern recognition; the easy way out always has detrimental consequences. Miscalculations are to be expected; however, making the same mistake over and over again expecting a different result is insanity.
So when will inflation get to an unbearable point? We haven’t felt it in a big way yet, because the United States has the unusual advantage of using that freshly printed currency to pay back the interest on our debt; that 300% increase in money supply hasn’t gone directly into the economy yet. It takes about two years for the freshly printed money explosion to impact inflation rates in an overwhelming way, so we should start to feel it even more substantially in the next couple years. We should brace for impact; inflation is here, but massive inflation is coming. The American people should do a couple things to survive in an age where prices of basic items will become too high for most people to afford life as we know it.
Keep a substantial amount of non-perishable food on hand. Food prices are already incredibly high and rising at an alarming rate. Companies like Food Insurance provide emergency freeze-dried food with a shelf life of at least 25 years. While this is an investment worth perusing, intentionally buying a little more groceries with longer shelf lives works as well. While the idea of accumulating an ample amount of canned beans seems a little extreme or crazy, it’s smart because we could see the GDP fall 15-20% in the next year if drastic changes don’t take place within financial systems worldwide. Just to offer perspective, the GDP fell 29% over 4 years during the Great Depression, and people certainly went hungry then.
Be hesitant to invest in stocks, bonds, and mutual funds; invest in precious metals. According to Adrian Day of Adrian Day Asset Management, “Gold is about the only thing that has done well this year… don’t trust paper money… the budget deficit in the U.S. is too out of control to put all your money in the bank.” The point of backing your money with precious metals is to support paper money with the only asset that will always hold value. It has retained value since the beginning of commerce, and will continue to either increase or decrease less than everything else.
Pay off as much debt as possible, and do not borrow money. This could be the America’s greatest tragic flaw—spending money we don’t have. The concept is simple, yet hard for Americans to live by, due to the sense of entitlement that surrounds almost every aspect of our culture and the poor example set in Washington. Ben Franklin’s virtues of moderation and frugality come to mind, here. Society bombards us with the “more is more” mentality, when in actuality; a simple life is a satisfied life. I’m not saying that modern conveniences are inherently destructive, but don’t be surprised when the events of your life seem to move slightly slower than the time it takes for your microwave to pop popcorn, and life’s direction isn’t always as clear as the purified water you drink. Keep perspective, spend less than you earn, and cut out extraneous minutia you don’t need.
The inflation problem the U.S. faces cannot be fixed if it continues in its current spending habits. Times are bad, and I believe they will get worse. However, challenging times generate innovation, efficiency, and hope, if the right leaders emerge. I refuse to be the 99% who will be blindsided by an even more drastic economic crisis than the current recession.
Overall, I encourage you to seek truth, especially the kind that hurts. Depending on the action taken, it’s that kind of truth that can either destroy or save your life.
Sydney Phillips // Lee University // 12.02.2011