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How to Escape Inflation Trap Set by the Fed, Treasury

By    |   Monday, 08 Nov 2010 09:02 AM

The Federal Reserve has tipped its hand. The central bank unveiled a plan to print money to the tune of $600 billion between now and June.

Why are they doing this? Well, they’ve shot all of their bullets in their “interest-rate gun” and that hasn’t worked in turning the economy around.

Therefore, they have to invent another gun that has some more bullets in it. Therefore, they’ve come up with this latest scheme … I mean, program.

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By printing another $600 billion, the Fed has the effect of being able to lower interest rates another 50 to 75 basis points. This is a way to effectively take interest rates into negative territory. So this is how they’ve found a way to create more bullets to fire at the economy.

However, these tactics didn’t work in the first round of quantitative easing — and I don’t think it’s a good thing to do this time around, either. All it did last time was jack up the prices of goods that we use, yet kept unemployment roughly the same because it didn’t create jobs.

Now they’ve unleashed QE 2.0 and the result likely won't be any better.

The Fed and Treasury have a purposeful agenda to bring down the dollar and to jack up inflation. This isn't happening by accident. It’s being purposefully planned.

For instance, on Oct. 19, Treasury Secretary Geithner stated that “a weaker dollar may now be in the national interest.”

Now, if I had a magic wand and I could wave it and make your $1 bills suddenly worth 80 cents — would that be in your interest? I don’t think so. However, it’s never in my interest for you to water down the dollars in my pocket.

But it’s not just the Treasury … the Fed is in bed with them. For instance, Charles Evans of the Chicago Fed has recently said that “temporarily boosting inflation may be a hard pill to swallow, but potentially beneficial.”

OK, once again — when is it in your better interest for the cost of goods to rise? Never, of course. But for some reason, these guys don’t get this.

But then Mr. Evans also said that “boosting inflation is an entirely appropriate strategy to escape a liquidity trap.”

Notice that term (“strategy”) that he used. There is a “boosting inflation” strategy going on out there. That strategy all but guarantees the rise of commodities and the dilution of the value of the dollar.

This is causing a commodity boom and a dollar bust.

So what can you and I do? I mean, you’re not going to stop the tactics of the Fed or Treasury. So how do you combat that? Well, on a national level, you really can’t.

Therefore, most Americans will be swallowing the pill that Mr. Evans spoke about. However, that doesn’t have to be you.

For instance, if you’re a buyer of the commodity-exporting nation’s currencies and you’re a seller of the greenback, then you’re able to take advantage of both sides of the Fed and Treasury’s agenda.

The rise of inflation isn’t a bad thing to commodity exporters. When market prices of commodities rise, they can charge you higher prices … yet it cost them roughly the same as it always does to produce these commodities. That means that their profit margins soar and their economy does much better.

Australia and New Zealand are probably my top two currencies that I like in this “commodity boom” that we’re going through right now. They are huge beneficiaries.

Other commodities that could greatly benefit from this boom over time are Canada’s dollar, Norway’s krone and Brazil’s real.

When you position yourself toward who will win in the Fed and Treasury’s strategy and against those who will lose out (mainly the U.S. dollar), then you’ve got a recipe to protect you and your family from the “hard inflationary pill” that most Americans are going to be forced to swallow.

In my Money Matrix Insider newsletter, we’re constantly taking advantage of themes like this. I’d encourage you to take your stand, for your family’s sake, against the Fed and Treasury too.

Don’t let them bully you and your finances around. Take advantage of these choices that most Americans don’t even realize are out there and get into foreign currencies.

If you don’t know how to do that … I’ll show you through my newsletter. But whatever you do, prepare your family for the times ahead. The Fed has tipped their hand. So now it’s time to make the needed changes to protect yourself, your assets and your future.

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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The Federal Reserve has tipped its hand. The central bank unveiled a plan to print money to the tune of $600 billion between now and June. Why are they doing this? Well, they ve shot all of their bullets in their interest-rate gun and that hasn t worked in turning the...
sean,hyman,fed,treasury
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2010-02-08
Monday, 08 Nov 2010 09:02 AM
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