Inflation-Proof Your Portfolio

How to Protect Your Money from the Coming Government Hyperinflation

David Voda

• Publisher: Wiley
• Year: 2012
• Print ISBN: 9781118249277
• eBook ISBN: 9781118283219
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

The must-have guide on how to protect yourself during the coming age of hyperinflation

The Petersen/Pew Commission on Budget Reform recently warned that the national debt was expected to grow from 40 percent of the gross domestic product (GDP) in 2009 to 85 percent in 8 years, 100 percent in 12 years, and 200 percent by 2038. In other words, in just a few years the U.S. will owe twice as much as it produces. Since no conceivable level of taxes and borrowing will enable the country to service such an enormous debt, it is inevitable that government will turn to the same tricks its antecedents have been playing since Ancient Rome: debasing the dollar and letting inflation run rampant. Inflation-Proof Your Portfolio: Protect Your Money from the Coming Government Hyperinflation is your guide to understanding the debt crisis and rising inflation, packed with the key tools you need to protect yourself from the fallout.

• Neither an economic treatise nor a collection of specific investment advice, the book is intended as a resource to help empower citizens to take action to protect their money from the coming government-induced hyperinflation
• Essential reading for individual investors and general business readers alike who want to keep their money safe when inflation sets in
• A runaway self-publishing hit, this new edition is fully revised and updated
• Get the information you need to formulate your own plan of action to protect your investments

The U.S. dollar is almost certain to have a sustained run of extremely high inflation over the next decade because of continued huge government deficits and unfunded liabilities, and this book is the resource you need to be ready.

CHAPTER 1

The Dollar’s Shrinking Value

As the U.S. government racks up a national debt approaching the size of the entire economy, something’s got to give. When the public debt of approximately $15 trillion is added to the $50 trillion guaranteed for Medicare, Medicaid, Social Security, and other guarantees related to the 2008–2009 bailouts, the government is on the hook for as much as $100 trillion.1 Increased taxes and budget cutting just won’t make a dent in obligations of this size. When the bill comes due, expect massive inflation.

Why Governments Love Inflation

Inflation occurs when a government coins money faster than society creates wealth. The government, with its insiders and elites, is both the cause of and the primary beneficiary of inflation.

To see why, consider the past, when money was linked to metal coins made out of gold or silver. In ancient Rome, a denarius was at first almost 100 percent pure silver. Gradually, the Roman government reduced the amount of silver in the denarius until it contained only 5 percent silver. The hyperinflation induced by the currency manipulation made it impossible for the government to collect taxes in a timely fashion and led to this familiar scenario:

At first, the government could raise additional revenue from the sale of state property. Later, more unscrupulous emperors like Domitian (81–96 a.d.) would use trumped-up charges to confiscate the assets of the wealthy. They would also invent excuses to demand tribute from the provinces and the wealthy.2

By debasing the currency, the Roman emperors were able to pay off government debts by forcing their citizens to accept coins that had less and less precious metal content. The debased coins were worth less, forcing citizens to spend more and more denarii to buy basic goods. In other words, debasing the currency caused inflation.

“It Can’t Happen Here”—or Can It?

Today a similar debasing process is going on with American money. Once a U.S. dime was 90 percent silver; now it is 0 percent silver. Until 1934, a U.S. dollar bought an ounce of gold for the fixed rate of $20.67. Now it costs over $1,500 to buy an ounce of gold.3

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Taxes: Your Money or Your Life

“To actually finance the President’s current spending plans, taxes would have to rise 20 percent across the board over the next decade and 60 percent over the next 25 years.”

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The U.S. dollar is almost certain to have a sustained run of extremely high inflation over the next decade because of continued huge government deficits and unfunded liabilities like the recent health care reform. To actually finance the President’s current spending plans, taxes would have to rise 20 percent across the board over the next decade and 60 percent over the next 25 years.4 Even before the health care makeover, the Petersen-Pew Commission on Budget Reform warned that in 2009 alone, the national debt shot up from 41 to 53 percent of the gross domestic product (GDP). The Commission expects the debt to reach 100 percent of the GDP by 2022 and 200 percent by 2038.5

In other words, in just a few years our nation will owe twice as much as it produces. We’ve run up the credit card to owe double what we earn in a year. Since no conceivable level of taxes and borrowing will enable the United States to service such an enormous debt, the cowardly political way to deal with the situation will be to allow inflation to run rampant.

How Low Can It Go?

What will happen is that more and more dollars will be pumped into the economy—far more money growth than the underlying economic growth rate would justify. The newly printed money will gradually be worth less and less. But legally, holders of U.S. obligations are forced to accept the devalued dollars. This is exactly the same trick the Roman emperors used.

It’s a trick that works really well as long as inflation is so slow—a few percent per year—that people don’t really notice. But if the supply of money grows too quickly, the inflation rate can become very high very fast. (It would be hard not to notice the 25.8 percent loss of purchasing power consumers are experiencing in Venezuela this year, for instance.6) And if citizens completely lose faith in the value of a currency, the inflation rate can shoot up to hundreds or even thousands...

Table of contents

• Cover
• Contents
• Title
• Copyright
• Dedication
• Preface
• Chapter 1: The Dollar’s Shrinking Value
• Principle 1: Exchange Dollars for Real Things
• Principle 2: Future Money is Cheap Money
• Principle 3: Diversify Out of Dollars
• Principle 4: Prepare for the Worst, but Expect the Best
• Conclusion
• About the Author
• Index