THREE THINGS EVERY AMERICAN SHOULD KNOW

Three simple things that we all should know and act upon. They could make a big difference in your life.

1) Our Currency is Inflating at the Highest Levels in History:

Trying to save money in an inflating currency is kind of like trying to pour water into a bucket with a small hole in it. You are taking what you think is responsible action, but in time you realize all your effort’s being wasted.

What is inflation? We hear about it every day in the news, and most will respond “its just increasing prices”. To put it simply, inflation is when money loses its value, and that is why prices increase. Ultimately, it means your standard of living tanks: you can afford less things, and you have to work even harder to keep the things you do have. Sound familiar?

With all the pundits and opinions in the news, its tough to determine where this is all headed. But taking a few steps back, history shows us many societies that have been infected with this monetary disease- ancient Rome, 18th century France, and Weimar Germany in the 1920′s, and modern day Zimbabwe are some good examples. If there were such a thing as a doctor of economic health, someone who had studied the rise and fall of civilizations and their currencies, he’d tell us the following:

• When a country prints too much money ( usually to go to war, or to fund projects) there is inflation.
• If that inflation is allowed to continue, it snowballs out of control – bringing increasingly high prices, greater debt, and business failures.
• If the inflation continues even further (hyperinflation) , the currency collapses, and the citizens lose all they have (except for those who see ahead and protect themselves).

We are in the middle stages of this disease today in the US. The Federal Reserve – which controls our money supply, has been inflating our currency at breakneck speed for about 37 years. This deeply affects everyone, from unemployed to millionaire, because your money literally shrinks. The solution is simple: convert dollars into something of stable value.

2) Government Numbers are Faulty; The Media is not your Friend

Everyone knows about inflation. That is why we keep money in CDs and play the stock market. What we don’t know is that its much higher than what is reported to us by the official numbers. CPI, the consumer price index, is a number compiled by the US treasury which is supposed to report what inflation is. Yet it is falsified ( by excluding things like food and oil) to create a sense of economic security in people. Same goes for GDP, unemployment, and the money supply. The huge problem with misinformation is that people cannot then protect themselves and take proper action.

Hate to say it like this, but its true. Just about every media story is written not to tell you the news, but to sell you an idea that somehow benefits the entity that owns the news source. One of my favorite clips of all time is below. Late 2006, CNBC hosts media spin doctor Art Laffer and author Peter Schiff to talk about the economic outlook.

I love this clip, and listen to it over and over. Though its obvious today he was right, realize that two years ago when this was recorded, a great majority of the viewers would come away thinking Peter Schiff was a crackpot. My personal opinion is that CNBC, owned by General Electric, needed to paint a rosy outlook, to deter Americans from pulling money out of the stock market. Funny, they never invite him on after this.

We need to stop relying on major media to report the news honestly to us, and assume they will misinform us until the Titanic goes down. We need to be more careful what gets into our heads.

3 Gold and Silver Retain their Value

It can’t be said any plainer. Gold and silver retain their value in times of economic difficulty. This plays out in history over and over again. Gold and Silver have been the money of choice for humanity for the last three thousand years, and are recognized everywhere on the globe. They are not stocks, they are not investments, they are money.

In the countries named above where the currency was being destroyed by inflation, those who knew bought gold or silver and kept the value of their wealth while others lost everything. In fact, a country that honestly backs its currency with gold or silver (as we used to prior to the 1930s) cannot inflate its currency, because the amount of gold on the planet is limited. Which brings me to another point.

When inflation starts to become unbearable, everyone will want to convert dollars into gold and silver. Yet the amount of gold in the world is extremely limited. There is nowhere near enough for everyone to buy. This ultimately means two things, a) the price will be driven extremely high b) the vast majority of people will not own gold or silver. Therefore, in the future, gold and silver at today’s prices will look like an incredible bargain.

So, buying something of value is a great way to diminish the effects of inflation on one’s wealth. Precious metals like gold and silver are indeed valuable. But don’t take this article at face value. Do the research for yourself. Come to your own conclusion. To guide you, answer the following question by looking up this info.

Homeowrk question: if you had $10,000 in January 2000, and you purchased gold, what would it be worth today? How about silver? How about a CD? The Dow? (Hmmmm. CNBC never told me that…)

4) Bonus

Okay, the title says three things, but since you took the time to read this far, I thought I’d hit you with one last point, which is just as or more important than the others. In history, when states inflate their currency, they tend to get, well, mean. They begin to pass laws diminishing people’s rights, forcing them to trade in specific ways, detaining them and even imprisoning them- ultimately ending in a totalitarian type state. Look at Weimar Germany, which led to Hitler coming to power, and modern day Zimbabwe and Robert Mugabe.

This is a point that can be easily expanded upon, but that’s more than enough for now.

Have a fun weekend!

Jay

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~ by moneycpr on June 26, 2008.