Inflation is Back!
Our seven months of deflation are now over — and hyperinflation is waiting around the corner. November’s 1.84% inflation rate marked the end of seven months of deflation — the first deflation in the United States in more than 50 years.
| Mar | -0.38% |
| Apr | -0.74% |
| May | -1.28% |
| Jun | -1.43% |
| Jul | -2.10% |
| Aug | -1.48% |
| Sep | -1.29% |
| Oct | -0.18% |
| Nov | 1.84% |
During our recent deflationary spiral, it made sense to maintain a liquid portfolio and not to spend any money that didn’t absolutely have to be spent. Why buy a truck today when that same truck will cost less tomorrow?
Unfortunately, the proper response to our return to inflation is far more difficult to determine. With the value of “cash” falling, it no longer makes sense to stay liquid. However, the question of where to invest is a serious delimma. The stock market looks to be headed for a major correction in 2010. Real estate prices appear to be heading for further serious decline in 2010 and 2011 as Alt-A mortages collapse. Commodity prices, which have been driven past historical highs on cheap borrowed money, are also heading for a major crash.
Frankly, there aren’t any “good bets” to be made in the American economy. Unless you have enough political pull that the government will force your investment to succeed, it probably makes more sense for you to invest overseas. I recommend nations with a strong rule of law and a good understanding of the principles of basic economics. Two nations which I can specifically recommend are Singapore and Panama.
It’s a sad state of affairs when you can’t invest in your own country, but the reality of the situation is that decisions which are being made by the Obama administration and the Democratic Congress are going to negatively impact the U.S. economy for decades to come. To protect yourself and your family, you must make wise investment decisions, and that means investing in growing economies instead of in shrinking ones.
