From the Editor: We've been tracking this threat for years, ever since Keith Fitz-Gerald brought it to your attention back in January 2010. Today, Resources Specialist Peter Krauth weighs in on some recent developments in this story, because three of the commodities he covers can protect you. The Fed can't print these things... Here's Peter.
Central banks may have foolish policies, but central bankers are no dummies.
They know exactly what they're doing. They even comprehend a few of the implications, too.
Which is why it's interesting that some American central bankers have suggested doing away with the debt ceiling altogether.
Famed investor Marc Faber recently said, "The question is not tapering. The question is at what point will they increase the asset purchases to say $150 [billion], $200 [billion], a trillion dollars a month."
Faber expects the Fed's current QE4 to become "QE4-ever."
That could mean years of money printing and ultra-low rates.
Even bond king Bill Gross recently chimed in his latest monthly outlook that "The United States (and global economy) may have to get used to financially repressive - and therefore low policy rates - for decades to come."
Either way, don't depend on the Fed to save you. You can save yourself.And now you'll need to...
The Best Investments to Hold When Interest Rates Rise
Inflation can be tough to contend with, yet investors should guard against inflation lest it eat away at their portfolios - which isn't hard to do if they know the best investments to hold when inflation rates rise.
Official interest rates are notoriously unreliable - outright false at times - which can downplay or underestimate the situation. Don't trust the numbers. Make that mistake, and your investments' value can evaporate before your eyes.To continue reading, please click here...
These Charts Show Why QE3 Hasn’t Triggered Inflation – So Far
It defies both common sense and monetary theory - or at least until you find out where all that QE3 money ended up.
Why the U.S. Dollar is Rising – And Why It's Still Doomed
Many have wondered - and rightly so - why the U.S. dollar is rising even though the U.S. Federal Reserve has done just about everything possible to debase the currency over the past five years.
Over the past two years, the U.S. Dollar index, which measures the dollar against a basket of major world currencies, is up by more than 12.6%.
Part of the answer is that most of the world's other central banks have pursued easy money policies similar to the Fed's. In the so-called "currency wars," the U.S. dollar has one major built-in advantage.
"The U.S. has never defaulted," explained Money Morning Chief Investment Strategist Keith Fitz-Gerald. "The world may hate our guts, but when all hell breaks loose, they all love our dollar."
Also helping to explain why the U.S. dollar is rising is that it remains the world's reserve currency - the money a majority of nations use to buy commodities such as oil -- and that the U.S. economy, for all its warts, is in better shape than most of the other developed economies in the world.
"The dollar the best-looking horse in the glue factory," Fitz-Gerald said.
So it wasn't too surprising that when the Fed recently hinted that it might start "tapering" its quantitative easing (bond-buying) policies later this year, the U.S. Dollar index spiked 3.1%.
But Fitz-Gerald said that investors still need to be wary of the stronger U.S. dollar going forward.
This Sept. 2 Event Could Send the U.S. Dollar Crashing
The Misunderstood Link Between Oil, Natural Gas and Inflation
According to conventional wisdom, there can't be a significant rise in inflation without a corresponding, and usually preceding, jump in energy prices.
In fact, the correlation between energy prices and inflation has become almost a mantra among some market pundits.
Unfortunately, the reality is somewhat different than what's portrayed by talking heads in thirty- second sound bites.
As with most complicated problems, the answer just isn't that simple.
While the energy sector stretches from hydrocarbons, through alternatives, to the renewed interest in solar, wind, geothermal and biofuels, it is the dominant force in the sector that tends to drive the markets.
That means crude oil and natural gas.
8 Reasons Your Dollar Doesn't Go As Far As it Did 10 Years Ago
Patients' hospital expenses have nearly doubled in the past decade. So, too, has the price of college textbooks. And gas prices have more than doubled, while prices of fuel oil and other fuels for home use have climbed a whopping 145%.
It's been a tough decade on the wallet, thanks to inflation.
The figures are based on a Yahoo! Finance analysis of items and services tracked by the Bureau of Labor Statistics' Consumer Price Index.
And the CPI, of course, is based on government stats which, as Money Morning has reported, routinely understate inflation.
Here are 8 reasons why inflation is pinching you, no matter what the Fed says about low inflation:
With Unchecked U.S. Spending, It's Time to Hedge Against Inflation
Uncontrolled government spending could force the Fed to monetize the government's debt, creating runaway inflation, former Federal Reserve Governor Frederic Mishkin warned in a report.
If these circumstances were to occur, the Fed would be unable to do much, if anything, to control inflation, Mishkin said in the report, presented at a conference at the University of Chicago Booth School of Business.
In that case, Mishkin and his co-authors, David Greenlaw, James Hamilton and Peter Hooper, argue that the result could be "a flight from the dollar," according to a summary of the report by noted Fed-watcher Steven K. Beckner writing for MNI.
The report states, "Countries with high debt loads are vulnerable to an adverse feedback loop in which doubts by lenders lead to higher sovereign interest rates, which in turn make the debt problems more severe ... Countries with debt above 80% of GDP and persistent current-account deficits are vulnerable to a rapid fiscal deterioration as a result of these tipping-point dynamics."
The authors of the report estimate U.S. net debt, excluding debt held by the Social Security Trust Fund, at about 80% of GDP in 2011, double what it was a few years before. To make matters worse, the United States runs a persistent current account deficit, which is funded by borrowing from other countries.
This puts the U.S. in a worse spot than Japan which, although its debt is much higher as a percentage of GDP, has a large current account surplus and a high savings rate.
Why Veteran Trader Says Inflation in 2013 Is Imminent
Is a spike in the monetary base - currency in circulation plus bank reserves at the Fed - the first sign of imminent inflation?
Art Cashin, the well-respected director of floor operations at the New York Stock Exchange for UBS, recently told King World News the increase in the monetary base may well be a sign of impending inflation.
Monetary base, sometimes called high-powered money, is the basis for the bank lending that drives our economy. When interest rates are normal, banks use their reserves for lending.
Unfortunately, these are not normal times. The U.S. Federal Reserve and other central banks around the world continue to hold interest rates at zero.
Zero interest rates mean zero returns. Investors don't get paid for investing. Banks don't get paid enough interest to compensate for the risk of lending money into the economy. Looking at it another way, there is no penalty for doing nothing with your money.
Why There's No Real Inflation (Yet)
According to Milton Friedman, "inflation is always and everywhere a monetary phenomenon."
If that is true, then you have to wonder where the heck all of the inflation is.
Every central bank in the Western world is holding interest rates down, and almost all of them are printing money like it's going out of style.
Five years ago, nearly every economist in the world would have told you this would cause inflation to skyrocket, and the big deficits governments were running would make matters even worse.
Taken together, monetary and fiscal policies are far more extreme than they have ever been.
Yet, inflation has remained rather tame. In Friedman's world that just wouldn't be possible.
But today inflation is only running at around 2%--well below where it should be according to his monetarist theories.
What does it all mean?....
It means even Nobel Prize-winning economists can get it wrong-at least in the short run.
Here's why Friedman has been wrong on inflation so far. It starts with his basic theory.