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Inflation is Coming…Where Should You Invest? Part II

Posted on | January 26, 2009 | 4 Comments

On Saturday, we started exploring the notion that inflation is coming.  When considering that inflation and deflation are solely monetary terms, it seems obvious that inflation is coming as the government is dropping rates and printing money which will ultimately increase the money supply.  Another reason that inflation is coming is the fact the the M0, which is the measure of money supply, has skyrocketed in the last two months.  The M0 has progressed in a tight range between 2% and 10% annual growth since 1960.  The highest growth rate since 1960 was during the Y2K scare of 2000 when the growth rate was approximately 15.8%.  Today that rate is at an astonishing 98.9%!  This is just another reason that we are going to see steep inflation in the coming months.

If a central bank doubles the monetary base within a couple of months, as the United States Federal Reserve has done as shown with the M0, there is no way that inflation will not occur.  There is just too much money supply baked into the system.  So, not only are we going to see inflation, we are likely to see HYPER inflation.  The number one investment during an inflationary period is commodities and specifically gold.  We have seen gold travel from $800 an ounce to over $900 an ounce in the last two weeks alone.  This is nothing compared to the drastic gains we will see when inflation starts to show itself.  Gold was up over 1500% during the inflationary period of the 1970s and that may not even compare to what we are seeing today.  The actions by the Federal Reserve Bank are going to cause inflation to be even worse this time around.

Make sure that you put your money in a smart place, but do so by doing your research.  Part III of this series will explore investment vehicles that will allow you to take advantage of the coming HYPER inflationary period.

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Comments

4 Responses to “Inflation is Coming…Where Should You Invest? Part II”

  1. » Subprime Blogger » Inflation is Coming…Where Should You Invest … » Subprime Mortgage Refinance
    January 26th, 2009 @ 8:35 pm

    [...] news by unknown « “I Can’t Pay The Rent” – A Landlords Take on What to Do– Mortgage [...]

  2. Arvind
    January 27th, 2009 @ 3:58 am

    That is a good observation. Especially at this time when most folks are most occupied and concerned with the depression in the economy and how best to deal with it, we tend to lose focus on what will happen when this predicament finally pass. Also, I have heard of the term Hyper inflation but it is a very complex term and principle which I will need to understand before commenting! But there have been some countries that have faced it before (e.g. Germany, usually after losing in war or after a depression) and the currency certainly loses it value so commodities esp Gold etc might be a good investment, like you have mentioned.

    Awaiting next article ! :)

  3. Investing to Beat Inflation - Money & Investing - Banks.com
    January 27th, 2009 @ 2:35 pm

    [...] of the realities we are facing right now is that inflation is coming. We got a taste of it last summer, but we are likely to see even more of it in the time to come. As [...]

  4. Subprime Blogger » Best Investments During an Inflationary Period
    February 13th, 2009 @ 10:31 pm

    [...] Inflation is Coming…Where Should You Invest?  Part II [...]

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