For years now we have been borrowers. We spend way more than we make. I am not just talking about the government but also the people. You can see this in our balance of trade. Because of this the dollar is falling like a rock. People don’t want to lend money because it will probably devalue more than the interest gained.
Imagine that I would lend you $1 million dollars and you need to pay me $1.1 million a year from now, well if the dollar goes down 20% I am only getting paid back (In present dollars) $880,000. So why on earth would I lend you the money. This is the problem that we are having now. Up until recently most of the money being lent to Americans was coming for foreign investment. These foreign investors as a whole are hesitant to lend us money.
So what is the solution that the government thought up. Well they offered to lend money, billions of it, to the banks so that they can lend it back out. But where did the fed get this money to do this, they simply typed it into a computer and created it. This makes more dollars in existence, and will further sink the dollar down. This cycle will keep repeating and soon our dollar will be worth very little.
What will this do for us. Well it will make the dollar cost of most things go up. Even real estate will soon start to go up with all of this. Gold is now over 1000, silver is over $20 and oil is at record highs over $110. This has been coming for YEARS now, I have been talking about it for about 3 years. This just that start, until we start exporting much more than we import, and we stop spending so much this will keep happening.
So what is the best position to be in? Well you want to have as little dollars as you can, you even would want to be short on dollars. This means to borrow them. I have debt for my house, and for other things, and when I saw this coming I took out as much as I could and invested it in things overseas, and in physical things such as real estate, and I think that in a few months, the value of these assets will be much larger than the debt. The banks have figured this out and stopped lending to most people.
So what will happen to people who were not ready? Well it will not be good. If you have a job, and save money and have no debt you are in the worst position. The money you have saved will be worth less than it should be. The
What can you do not? Well as I said before the people who see it first are the ones that are in the best shape, they can prepare for the change. Now it is too late, there is very little that can be done. Right now I think it would be good to move money overseas, invest in companies with a large amount of foreign exposure. Pay off only the minimum on debt. Don’t keep cash, go turn it into silver. But MOST important, if you can afford it GO BUY REAL ESTATE. The prices will never be this low again, you can still usually borrow money to buy real estate and pay back later with money that is worth less. Prices will go UP much faster than your pay will go up, so be ready for that. Food cost will go up, and fuel costs will go way up. Your pay will probably stay flat. Consider a side business if you need more money.
What should the government do? Well they were the ones that created this, they were lending money out so cheaply, and printing money like crazy to keep us afloat. You got to remember that the government is over 9 trillion in DEBT. They also have over 30 TRILLION in obligations to people in the form of social security and government retirements. This is a huge debt. So what they did is they tied this to CPI, the fake, government created index of inflation. Today it was released and it was 0%. The people on CNBC just laughed at how fake it is. But because it is 0% that means that the social security debt does not go up this month. Now, by any measure dollar is worth MUCH less now than 5 years ago, I would say it is worth half as much or so. So basically the government just CUT their debt in half because of the weak dollar, and this is very smart. But they can’t let people know this is going on, they have to spin this so that foreign investors and the general population don’t know what is going on. For all the people who are not watching are going to be hurt, but for the government, the big investors and all the people who see the signs and act on it, this will be a great time of huge wealth creation.
Jason Dragon
http://www.jasondragon.com/
http://www.capitalactive.com/
In the past I have made a good deal of money on silver, I bought a lot for under 6 during 1996-1998. I sold the last of it when silver hit $19.50 at the start of this year, but I have never seen a change this large this fast in silver. Look at this chart to the right. This may be a great time to buy silver. Of course if you plan to buy silver, nothing is better for me than silver bars or coins. Most coin places sell these for 20 cents above the quotes price, and will buy them for 20 cents below the current price. This is how they make their money, but you get the item itself, and it is better than hoping the bank you buy the paper from does not fail, or you have a problem getting it done. Also you can give them as gifts, and sell them to friends and such and pay no transaction fees. Also it is easy to save, when I was in college I would buy two ounces every time I sold a computer, after a few years I had a few hundred ounces.