The U.S. government wants to stimulate growth in the moribund economy by stoking the fires of inflation. But by leaving interest rates low and buying up bonds - a policy known as quantitative easing (QE) - the U.S. Federal Reserve risks debasing the dollar, which could lead to a prolonged period of hyperinflation that would send prices skyrocketing.
After their most recent meeting on Sept. 21, Fed policymakers said low inflation warranted looser monetary policy. Minutes from the meeting said central bankers were prepared to ease policy to boost inflation expectations "before long."
The Fed is seeking ways to boost the U.S. economy after keeping interest rates at record lows and buying in $1.7 trillion of U.S. securities. The next move may be another round of quantitative easing that would expand the Fed's balance sheet even further.
But as it feeds more and more money into the financial system, the central bank may very well be sowing the seeds of hyperinflation.
Federal Reserve Policy Pushes the Dollar Ever Closer to Collapse
Much of the content of the latest U.S. Federal Reserve statement, released on Sept. 21, echoes the central bank's previous post-credit-crunch pronouncements: There is still too much slack in the economy, interest rates are still going to be near-zero for an "extended period," and the Fed will continue to use payments from its Treasury purchases to buy yet more Treasuries.
But this recent statement uses a new turn of phrase that should have Americans very upset. The Fed says "measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate." Though the wording treads lightly, it should not be taken lightly. It may signal the final push toward dollar collapse.
The Fed's dual mandate, since an amendment in 1977, has been to promote "price stability" and "maximum employment." While often discussed as if both goals are complementary facets of one mandate, they tend to have been at odds during every recession since the Great Depression.
Five Ways to Profit as Coffee Prices Soar
Coffee prices have zoomed over 54% in the last year, including 44% since June alone. Retired hedge-fund manager sees the potential for coffee prices to soar another 30%. Find out how to profit in this free report.
Question of the Week: U.S. Federal Reserve Keeping Low Rates Does More Harm Than Good
After their meeting last week, U.S. Federal Reserve policymakers said they are more worried about deflation than inflation and vowed to look for ways to help along an economy that is experiencing worrisomely slow growth.
In fact, the central bank's rate-setting Federal Open Market Committee (FOMC) said it plans to keep the benchmark Federal Funds rate at its record-low level unchanged between 0.00% and 0.25% for the 20th consecutive month. And, using its go-to line - central bank policymakers said rates could remain that low for "an extended period."
In the near term, that appears justified. Core inflation is running at only 0.9%, below the Fed's comfort-level target of 1% to 2% - where it says the inflation rate needs to be for price stability. Fed Funds futures at the Chicago Board of Trade (CBOT) now show that traders believe there is a 54% chance the Fed won't increase short-term rates until its November 2011 policymaking meeting.
Exchange-Rate Risk: The Unseen Enemy of U.S. Investors
When specialty-chemicals-maker H.B. Fuller Co. (NYSE: FUL) announced its third-quarter results earlier this month - with earnings and revenue coming in well below expectations - company shareholders suffered an 8% haircut in a single day.
Rising raw material costs appeared to be the headline reason for turbulence at the company. But there was another culprit - a frequent flier in cases of earnings shortfalls, but one that often remains unseen and misunderstood.
I'm talking about exchange-rate risk.
U.S. investors don't realize it yet, but the level of exposure to exchange-rate fluctuations facing big American companies - as well as those based overseas - is steadily increasing. So what happened to H.B. Fuller - and its shareholders - is going to occur with increasing frequency. And in many cases, the fallout will be much more severe.
To better understand the rising exchange-rate risks facing U.S. investors, please read on...
Currency Exchange Rates and Your Investments: What You Don't Know Can Hurt You
You may be facing immense foreign-currency risks in your investment portfolio - and not even realize it.
If that's the case, don't feel bad: You're not alone.
The reality is that most American investors have no idea that currency exchange rates directly affect U.S. corporate earnings, this country's stock market, or the growth rate of our economy.
The bottom line: These investors don't realize that they face some pretty major foreign-exchange-rate exposure in their investment portfolios - as well as with the individual stocks contained in those portfolios.
This exchange-rate exposure can be accompanied by some pretty major risks. Understanding how currency fluctuations can enhance or destroy corporate earnings, the export sector and the U.S. economy, and even your personal wealth will make you a smarter, better investor. To understand how the currency markets are determining the fate of our economy, please read on...
We Want to Hear From You: Should the U.S. Federal Reserve Keep Interest Rates Low?
After their meeting yesterday (Tuesday), U.S. Federal Reserve policymakers said they are more worried about deflation than inflation and vowed to look for ways to help along an economy that is experiencing worrisomely slow growth.
In fact, the central bank's rate-setting Federal Open Market Committee (FOMC) said it plans to keep the benchmark Federal Funds rate at its record-low level unchanged between 0.00% and 0.25% for the 20th consecutive month. And, central bank policymakers said rates could remain that low for "an extended period."
In the near term, that appears justified. Core inflation is running at just 0.9%, below the Fed's comfort-level target of 1% to 2% - where it says the inflation rate needs to be for price stability. Fed Funds futures at the Chicago Board of Trade (CBOT) now show that traders believe there is a 54% chance the Fed won't increase short-term rates until its November 2011 policymaking meeting.
In the interim, faced with a still-wheezing economy, the central bank may even start buying back large blocks of U.S. Treasury bonds - a technique that pushes liquidity out where its needed.
Five Ways to Profit as Coffee Prices Soar
If you're anything like me, you can't resist stopping in for a "cup of Joe" every morning. If so, you're probably also like me in that you're experiencing a bit of pain in the wallet right now, given the steady increase in coffee prices we've see over the last year (and especially in the last few months).
If you want physical proof that we're operating in a truly global economy these days, just look at how these three factors have creamed your coffee budget:
- Lousy weather in Latin America is threatening a big chunk of the worldwide coffee crop.
- U.S. coffee stockpiles are reportedly at a 10-year low.
- And Vietnam and Brazil - two of the world's Top 3 exporters - are scheming to hoard their stockpiles.
Expect the trend to continue.
This may be bad news for your pocketbook - but it's great news for your portfolio. Coffee prices are going to rocket another 30% from here.
And with the strategy we're about to show you, this run-up in prices will be truly good 'til the last drop.
To learn more about how to profit from the global bull run in coffee, please read on...
How to Profit From the "Widow-Maker" Trade – Shorting U.S. Treasury Bonds
Although we're in the midst of a U.S. Treasury bond bubble so big that pundits are calling for investors to short the government paper, resist the urge to jump in with both feet.
Doing so right now is nothing more than a "widow-maker" trade that will test both your patience and your pocket book. And yet, "shorting" the U.S. Treasury bond market is an opportunity you can't afford to pass up - so long as you execute the trade correctly.
For the best Treasury bond strategy to deploy right now, please read on...
Russia: Is it Time to Invest in One of the Coldest Countries on Earth?
Of all the unpleasant societies in which to live, Vladimir Putin's Russia is among the nastiest. Journalists and businessmen disappear, a knock on the door at 3:00am can prove fatal, and nothing gets done without endless side-payments to obscure fixers.
Still, Goldman Sachs Group Inc. (NYSE: GS) in 2001 identified Russia as one of the four great "BRIC" growth economies. And while much of its gilt has been worn off, Russia still has many supporters in the investment world. So the question is: Provided you don't have to live there, is it worth devoting a few of your investment dollars to the country?
To find out if Russia is worth the investment continue reading...