Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17
Why the SNP WILL Destroy Scotland, Exit UK Single Market for EU - IndyRef2 - 19th Mar 17
Crypto Craziness: Bitcoin Plunges on Fork Concerns, Steem Skyrockets and Dash Surges Above $100 - 19th Mar 17
What ‘Ice-Nine’ Means for Your Money - 19th Mar 17
Stock Market 4 Year Cycle - 18th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

US Inflation and the Falling Dollar - You're being lied to!

Currencies / US Dollar Apr 12, 2007 - 01:34 PM GMT

By: Money_and_Markets

Currencies

Larry Edelson writes : Recently I told you how the Dow has lost over 50% of its value since 2001, despite its recent gains. Put another way, if you bought all the stocks in the Dow Jones Industrials back in 2001, the purchasing power of your investment today would be less than half what it was back then.

I don't know about you, but I think losing 50% of your money's purchasing power is an outright disaster. Even worse, most investors fail to recognize this has happened. That's because the government is lying about inflation.

Today, I want to talk about the root of the problem — the terribly weak U.S. dollar. And I'll tell you what its consequence, rising inflation, means for your portfolio. Because if you don't grasp what's happening, your investments will get killed.


The Dollar Continues To Get Creamed …

Since early March, in barely a month's time, the U.S. dollar has lost another 1.9% of its value against other major currencies. It's lost the same — in some cases even more — when compared to minor currencies, such as the Thai baht, Malaysian ringgit, and more.

You can see the decline in the chart to the right. It's not a pretty picture. What's behind the dollar's fall? All the forces I've been warning you about:

The huge debt problems in this country, in both the public and private sectors … the terrible real estate market … political infighting that is making the U.S. look unstable to the rest of the world … and the fact that Washington is continually pulling the wool over the public's eyes.

I've been saying this repeatedly, but it's so important that I want to remind you again: Central bankers, when faced with a choice between deflation and inflation, will always opt for the latter, attempting to avoid recession and deflation at all costs.

They keep interest rates artificially low. They pump up the supply of money and credit by effectively printing money behind the scenes. And they let bubbles expand wherever they can.

In the process, the main instrument of the economy — the currency — is the first to suffer. That's why the dollar has plunged 17.5% in the last four years, and why it continues to be weak at the knees right now.

It's also why the Dow can rise, but you can actually be losing money all the while. It's simple … if the Dow goes up 10% but the value of the dollar falls 20%, you've lost 10% in terms of your money's purchasing power. [Editor's note: For more on this, see " How the Dow is already getting killed ."]

And the falling dollar has an important side effect …

Inflation Goes
Through the Roof!

Do you believe what Washington is telling you about inflation, that it's running at about a 3% annualized rate?

I sure hope not, because you're being lied to. By my estimates, inflation is rising at more like 10% a year. I'm not just talking about oil and gas prices, either. Just look at these national figures:

  • According to the Wall Street Journal , health care costs rose 10% in 2006.
  • The average property tax has jumped 27% since 2000.
  • Tuition at private colleges has been rising at an annual average of more than 9%. The national median tuition for one year at a private school (including room and board) is now $33,533!
  • Tuition at public universities is also rising sharply, up 6.2% in 2006.
  • And in just the last three years, the average grocery bill for a family of four has skyrocketed from $280 to nearly $400 a month. That's a 42% increase, or an average annual inflation rate of 14%!

I could go on and on, but there's no need. I'm sure you're already acutely aware of how much prices are going up in your own life. All you have to do is look at your monthly bills and regular purchases.

So, enough said. Inflation is here. And, it's only going to get worse as the dollar continues to weaken against nearly all major — and most minor — currencies.

What to Do About the Falling Dollar and Inflation

First, don't be deceived by Washington or the Federal Reserve. Their inflation figures are hocus-pocus. They are not giving anyone an accurate measure of true inflation.

Second, don't be fooled by the Dow Industrials. Your stock investments can be losing money, even when they're going up!

In fact, for the Dow to regain the purchasing power it had six years ago, it would have to double to more than 24,000.

And that's if the dollar were to stop declining! I don't think that's going to happen. Hence, I do not recommend investing in broad-based U.S. stock markets right now.

Instead, for your U.S. holdings, I continue to like stocks that act as inflation hedges, namely select natural resource companies like the ones recommended in my Real Wealth Report .

Third, diversify your investments.

For starters, that means a direct stake in gold. Gold is the only asset that is universally beating out inflation. In my view, one of the best ways to own gold is through the streetTRACKS Gold Fund (GLD). Each share represents 1/10 of an ounce of gold, and the fund eliminates storage and shipping worries because the metal is held in trust for you.

And if you aren't doing so already, look at select overseas markets, too. Many of these investments will benefit from a falling dollar and are beating out inflation hands down.

Best wishes,

Larry Edelson

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.MoneyandMarkets.com


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

mike
07 Nov 07, 10:42
invest Canadian

over the past 5 years I have told everyone to invest in utility stocks in Canada. If any have done so they have more than doubled the investment. In 2002 the Can dollar was .62 USD. Now Nov 6 2007 it is 1.09 USD. Coupled with the annual 5-6 % that is a sure investment in the utility companies here (Gas, Electricty etc), your profits would be over 100%. The Can Dollar in my opinion is still underrated, and will rise on its own with the worlds currencies as well as rising against a continually falling USD. I predict that within one year from this date, (Nov 6 2007) the Canadian dollar will be 1.50 USD.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife