Guest Author - Tony Daltorio
Members of our country's economic elite, namely Wall Street and the Federal Reserve continue to be operating in a full panic mode. This panic will most lilely lead to inflationary problems down the road for the US economy.
This generation of Wall Street elite has never seen a bear market like the one we are having currently. So they don't know what to do and how to act. They are "assuming" we will have another Depression as in 1930s or even worse.
One sign of this is Wall Street's panic about deflation. Deflation occurs when economic conditions are so bad that prices actually drop because there are few buyers for goods. The US did actually experience deflation in 1930s.
The Wall Street dimwits are incredibly pricing in deflation for the next two or three decades or longer. They are expecting our country to be in terrible shape for decades!
This is madness and I believe comes from inexperience in bear markets. Like a little child, Wall Street is inventing monsters and succeeding in scaring themselves silly.
The problem is that Wall Street fears about deflation has prompted actions from the Federal Reserve. The Fed has opened the floodgates on creating money and has been creating trillions of dollars of what I call funny money out of thin air.
When actions like this are taken by the Federal Reserve, it has historically led to one thing - inflation. My best guess is that we will begin to see higher inflation by the end of the year. Even if my timing is off, future inflation seems very likely.
There is one very safe way for investors to protect themselves against any future inflation. Investors can purchase Treasury Inflation-Protected Securities or TIPS from the US Treasury.
Although having risen in value recently, TIPS are still at very cheap prices. These bonds are dirt cheap because Wall Street sold them in a panic - after all, why own inflation bonds when everyone "knows" that we'll have deflation for decades? Wall Street stupidity seems to know no bounds.
TIPS promise to pay a fixed rate on interest plus realized inflation as measured by the government's Consumer Price Index or CPI. Here's an example - Say an investor buys a TIP bond with a 2% fixed rate. Subsequently, retail prices, as measured by the CPI, rise by 3%. The investor will receive 5% on their money.
If an investor thinks the Federal Reserve is really screwing up and retail prices will climb by 8%, then the TIP investor will get 10% on the money they invested.
TIPS bonds are accessible and affordable for all investors. An investor simply needs to open an account with the US Treasury. The Treasury's website can be found at http://www.treasurydirect.gov. Once your account is open, you can easily buy any Treasury security online or over the phone.
Since our government is so desperate for funds, the minimum required for purchase of all Treasuries is very low. The minimum required is only $100!
As always, please feel free to contact me with any questions or comments.