Tuesday, October 26, 2010

Winter of Our Discontent Round #2--There's More!

Not only will the weather be weird AGAIN, and the crop availability in the spring be hit-and-miss AGAIN, but we have dreaded POLITICS and MONEY from outside forces (in other words CHAOS) to battle with--this should prove to be a very busy winter.

Well outside the realm of home and hearth, there is a war shaping up, and this war involves global currencies. I know the only currency you want to think about right now is what's in your pocket after taxes, but this is where the root cause of government-produced inflation comes from: how much your own currency's worth compared to other global currencies, and who's doing the manipulating.

As we all know, Obama's (and other presidents before him) plan is to devalue the currency in order to devalue the debt. He's not the only one using this plan--several other countries are also planning to use the devalue-and-conquer debt repayment plan as well. In other words, they aren't actually GOING to repay the debt--they're just going to call the dollar value shrinkage "payment in kind". Other countries with large national debts are doing the same thing, making 2011 a giant race to the bottom as far as currency devaluation (money-printing) is concerned.

How this affects you: As your currency loses value, it takes more of that currency to get the same purchasing power you used to have. This is called inflation, and it's going to be generated by governments as well as producers.

Just as a small leak in the budget adds up to a torrent of lost money, the same is true when it comes to inflation, only it works in the opposite direction--a small increase will add up to a torrent of loss to the government and producers in the form of higher costs. None of this HAS to happen, but our administration has chosen to pay down the debt this way because there is no more money from ANYWHERE! Obama can't entice us to spend more, so he's going to FORCE us to spend more through inflation.

America isn't the only country that going to suffer this winter and in 2011--the only "safe havens" from inflation (really, they'll just see less of it) are emerging markets in countries not economically big enough to be members of the G-12, but are members of the IMF.

Speaking of the IMF, a meeting of the G-12 was just recently held concerning the devaluation of the currencies and a "global rebalancing." Dynamic Duo member Tim Geithner (the Boy Wonder) was sure to bring along his global rebalancing idea, which was promptly shot down (I think this was planned), and now G-8 governments are free to conduct a currency war (a race to the bottom).

2011 will usher in inflation from all sides, folks, with no investing way out except through gold (which is already over-priced IMO)--I believe this was engineered. Stocks will tank, bonds will be worthless, and real estate isn't going anywhere soon (at least in THIS country), so what's left to invest in? Certainly NOT currencies! Traders have already told us the answer: commodities and energy. Dividend plays are also going to look good in a presumably-declining stock environment, and the Dogs of the Dow might very well turn out to be the small investor's savior for the next two years.

This is why I've been screaming about debt and pantry for the last year. You have less than a week before we see the first signs of November's offerings. The faster the race to the bottom goes, the less purchasing power you have with your money. They think we stopped spending BEFORE--wait till they see what we're going to do in 2011!

Here in America, this will only last until January of 2013, when we usher in a new president. Other places in the world might not be so lucky as to name an ending date.


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