Best of the Week
Most Popular
1.Ukraine Preface, the Emerging Dynamics Of Petro-Yuan Standard - Jim_Willie_CB
2. Speculations Reversed - Gold Price Stealth Rally 2014 - Peter_Schiff
3.Bubbleberg News Drivel Masquerading as Financial Reporting - David A. Stockman
4.Nationwide UK House Prices 9.5% Inflation, Housing Market on Steroids, Help to Buy Anniversary - Nadeem_Walayat
5.How to Profit from Palladium Huge Price Surge… - Peter Krauth
6.UK Home Solar Panel Installations Good or Bad for House Buying and Selling? - Nadeem_Walayat
7.Global Gold Manipulation Update - MAP Wave Analysis - Marc_Horn
8.Ukraine Capital Controls and 200% Inflation But Still In Better Shape Than US! - Jeff_Berwick
9.The Rise of a Euro-Chino-Russian Superpower - Stephan Bogner
10.Across Europe Secession Movements Intensify - BATR
Last 72 Hrs
Silver, Gold, and What Could Go Wrong - 15th Apr 14
How I Intend to Survive the Meltdown of America - 15th Apr 14
France Wakes Up To The Multicultural Multi-Threat - 15th Apr 14
The Real Purpose Of QE - It’s Not Employment - 15th Apr 14
Peak Coal - 15th Apr 14
Flash Crash, Rigged Markets - What’s the Frequency Zenith? - 15th Apr 14
Forecasting U.S. GDP Growth: A Look at WSJ Economists’ Collective Crystal Ball - 15th Apr 14
Stock Market - Is Something Nasty About to Happen? - 15th Apr 14
How to Trade Your Way To Freedom - 15th Apr 14
Understanding (and Ignoring) the Media Bandwagon Against Gold - 15th Apr 14
When Stock Market Bubble Crashes, Take Refuge in Gold Stocks - 15th Apr 14
Bitcoin Price Strong Appreciation to Be Followed by Declines? - 14th Apr 14
Greece, Turkey, We're Shuffling The Cards on Our Europe Investing Play - 14th Apr 14
Silver Price Ultimate Rally: When Paper Assets Collapse - 14th Apr 14
Get Your Share of an Extra Trillion Euros Money Printing - 14th Apr 14
Fourth Reversals in The Gold and Silver Charts - 14th Apr 14
Stock Market Nearing Rally in a Downtrend - 14th Apr 14
London House Prices Bubble, Debt Slavery, Crimea 2.0 - Russia Ukraine Annexation - 14th Apr 14
Four Horsemen - Top Economists Explain the Source of Our Economic Crisis - Video - 13th Apr 14
Peak Oil And Global Warming – A Question Of Culture - 13th Apr 14
The Global Banking Game Is Rigged, and the FDIC Is Suing - 13th Apr 14
College Degree Earnings Propaganda - 13th Apr 14 - Andrew Syrios
Stock Market Potential Diagonal Triangle Pattern Forming - 12th Apr 14
Ukraine Crisis – Military Flash Drive Thinking - 12th Apr 14
Gold And Silver – 2014 Coud Be A Yawner; Be Prepared For A Surprise - 12th Apr 14
Gold Preparing to Launch as U.S. Dollar Drops to Key Support - 12th Apr 14
Manipulated Stocks Markets And The Empty Bag - 12th Apr 14
Stock Market - It’s Not Time to Panic… It’s Time to Buy - 12th Apr 14
Doctor Doom on the Fiat Money Empire Coming Financial Crisis - 12th Apr 14
Sheffield, Rotherham Roma Benefits Plague, Ch5 Documentary Gypsies on Benefits & Proud - 11th Apr 14
This Bitcoin Price Rally Might Be a Fake One - 11th Apr 14
GDX Gold Stocks Benchmark - 11th Apr 14
Silver Price Finally Outperforms – How Bullish Is That? - 11th Apr 14
Limits to Employment Participation, and Societal Change - 11th Apr 14
US Moves To Restrict Travelers Taking International Flights - 11th Apr 14
Bill Gross to El-Erian: 'Come on, Mohamed, Tell Us Why' You Resigned PIMCO - 11th Apr 14
British Pound GBP/USD - Double Top or Further Rally? - 11th Apr 14
Don't Miss the Boat on Big Biotech Catalysts: Keith Markey - 11th Apr 14
Russia Invaded Crimea and These US Energy Companies Made a Killing - 11th Apr 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

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


© 2005-2014 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

Free Report - Financial Markets 2014