Is anyone else having deja vu?
In 1973, the U.S. economy had:
Sound familiar? Yep, brush off your bellbottoms. The 70s are back.
And soon even Bernanke's shell games won't be able to hide the truth. After years of the Fed's loose money policy, inflation is biting back. And it's going to get ugly.
The government could stop inflation in its tracks if it would make some hard decisions. But if it doesn't, there are still proven ways to protect yourself from inflation. (For specific anti-inflation recommendations, take a look at the latest Money Morning special presentation right here.)
Learn more below.
Rising prices are hitting U.S. consumers a lot harder than the U.S. Federal Reserve - or the U.S. government - would have us believe. The government-issued consumer price index (CPI) is showing that "core inflation" - which includes prices for all items except food and energy - was up only 1% from last year.
By excluding food and energy prices, as volatile as they may be, the CPI fails to convey the pain that rising prices are inflicting on American households. Indeed, the true rate of inflation could be closer to 12%.
The CPI is a joke. Every American knows that in reality inflation is far higher than the CPI tells us based on what they feel in their wallets every day.
Our research suggests inflation is really running between 9% and 12%, which is more commensurate with what we all feel in our wallets every day.
Inflation is very real, and it's already here - despite what those in Washington continue to believe ... either because their data is so heavily manipulated or because of their own deliberate ignorance. And using history as our guide, it's going to get a lot worse before it gets better.
There are a few factors, but the single-most-important contributor to high inflation right now is the trillions of dollars central bankers around the world have pumped into the financial system since the crisis began in late 2007. Never mind that the crisis was caused by too much money to begin with; the central bankers have embarked on a course that ultimately risks destroying the very wealth they are trying to preserve.
Granted, 99% of Americans won't see or believe that because the markets have rebounded significantly as part of the reflation process. But they will definitely feel it.
The only reason we've been able to stave off complete inflationary disaster so far is that we've exported it to places like China, India and Brazil as part of our monetary policy, in exchange for the cheap goods we've come to depend on. However, that's coming to an end as those economies grow and begin to struggle with inflationary pressures of their own.
Eventually, inflation will come full circle and when there is no place else for us to export it, there's going to be hell to pay.
Inflation was already well under way before the powder keg in the Middle East exploded, so rising oil prices are not as much a primary inflation driver as most people think. That's not to dismiss it, because there is a direct relationship between scarcity and higher prices especially at the consumer level.
The key is time - and by that I mean how fast prices climb and how long they stay at elevated levels.
Most companies are prepared to absorb short-term volatility. But longer-term, there is no doubt they'll pass along to consumers (you and me) the higher fuel and petroleum costs that are part of their manufacturing processes. Many, like airline and transportation companies, are already doing so. So are food suppliers and materials makers, for example.
Why The Government Lies About the Real Inflation Rate
The government has strong motives for masking the real inflation rate.
Here are three:
Remember, chaos is actually opportunity in disguise. Washington is creating chaos - but from that we'll see many wealth-building opportunities arise.
For investors, the key thing to do in the years to come is to make investment choices that can weather the storm, and profit from the opportunities that emerge. Here are some very sound choices for turbulent times: