Tags: hyman | inflation | dollar | economy

Preparing for Runaway Inflation in Years Ahead

By    |   Monday, 19 September 2011 08:38 AM

You’ve heard the saying “the rich get richer and the poor get poorer.”

Many people think that what causes this is a political party or a particular president, etc. There may be something to that.

However, most of what causes this is inflation. Inflation is the “great divider” of the economic classes.

Formerly, the rich could own stocks and real estate and actually benefit from the rise of inflation over time while this was out of reach for the poor.

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Even much of the middle class didn’t really start investing heavily in stocks until the 1980s as commissions came down and minimum balances required to participate came about.

But now, most stocks are beaten up and banged up because they have to struggle in an economy with overregulation, too much government involvement on every level and a slowing economy.

So stocks, for the most part, won’t perform as well during the next 5 years to 10 years like how they did in the past. Yes, great dividend stocks with great balance sheets and established brands with huge market share and huge amounts of cash on their books will be fine.

But honestly, there are more stocks not in that situation than in that situation and that is why the major averages will struggle over the coming years.

Real estate used to be another strategy that people used to enhance their wealth and fend off inflation as the prices of properties rose through the years. At one point, it seemed like house prices would almost always go up pretty much every year. However, over the last few years, we’ve seen that’s not true.

Anytime a financial asset class has a major crash, it takes years to recoup. This happened with the stock market crash of 2000 with tech and internet stocks and it happened more recently with real estate values.

So the two most commonly used tools that people knew to invest in will (for the most part) be dead in the water for the upcoming years.

It’s going to be vital to search out other financial instruments that deal well with rising inflation.

Thankfully, the currency market has the answer to that problem.

You see, rising inflation isn’t bad for everyone … just most people. But if you mine or produce products that are rising in price due to inflation, your profits are shielded for the most part from inflation.

Thankfully there are a group of currencies that people in the industry call “commodity currencies.” These are the countries that are huge commodity producers and exporters.

Its countries like Australia, Canada and New Zealand. Therefore, things will be better in those countries during periods of runaway inflation than in places that don’t produce these goods that are rising in value.

In fact, the rest of the world will be stuck on the other side of the equation … being forced to pay higher and higher prices for the same things that they need.

After all, you’re not going to quit using gas, tires, toothpaste, food, etc.

You may gripe about the higher prices on the way to the stores. But then you’ll still fork over a good portion of your paychecks to pay for the things that you really need in life.

So the way to combat this huge runup in inflation that is coming from the enormous expansion of the money supply due to the printing of money by the Federal Reserve is to invest in the things that will rise with inflation rather than be hurt by it.

Not many things benefit from the rise of inflation and most of the things that used to benefit from it won’t benefit nearly as well in the coming years (like most stocks and real estate).

Most people won’t know to turn to these “commodity currencies.”

However, my readers will. By investing in “commodity currency ETFs” through your stock brokerage account and investing in the spot forex market by buying these foreign currencies against the declining buck, you’ll win the war that inflation is having on you.

For the people that are aware of these choices and put them into action, they will retain their place within the middle class and in fact, some will emerge into the upper class financially.

However, the sad story is that most people in the U.S. won’t likely be aware of these financial assets and how to invest in them. For those people, more and more of their pay will be swallowed up by inflation and they will become poorer as their standard of living erodes away due to rising costs.

This will cause one of the biggest losses in the middle class as they migrate into the lower class financially and enter poverty.

Huge transfers of wealth happen in every generation. But I think most of the ones that have come before will pale in comparison to what’s ahead of us.

Inflation will begin to rise so quickly at some point that many people won’t know what to do until it’s too late.

Now I know some people may think this is blown out of proportion. But you have to remember, this happened in Germany back in 1922-1923. At the beginning of that year, 100 marks would equal a dollar. By the time latter 1923 came around, it took over 10 trillion marks to equal a dollar. Yep, you heard right.

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So this doesn’t just happen in places like Zimbabwe. It happened in Europe’s biggest economic powerhouse and something similar can happen here too.

For those that are prepared well in advance, it doesn’t have to be a nightmare at all. In fact, you’ll be some of the few empowered people out there during these times.

But for much of the U.S. it will be a time of riots in the streets and political turmoil as this all manifests.

So get ready now. One thing is for sure. I’m going to have my Money Matrix Insider subscribers well informed during this time. We’re going to fight this battle together and win it because we’re armed with knowledge that much of the U.S. is totally ignorant about.

About the Author:
Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now.

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You ve heard the saying the rich get richer and the poor get poorer. Many people think that what causes this is a political party or a particular president, etc. There may be something to that. However, most of what causes this is inflation. Inflation is the great...
Monday, 19 September 2011 08:38 AM
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