Whenever you turn on the news, you hear about our country’s $16 trillion of national debt which we cannot pay off. Unfortunately, that’s just a small portion of our country’s financial problems. Did you know that we also have more than $60 trillion of unfunded government pension obligations, unfunded Medicare and Medicaid and social security liabilities? And that this debt is increasing at more than $1 trillion per year?
Just think – the US owes more than $76 trillion that it can’t pay off. Worse, none of our politicians are willing to raise taxes or cut spending to deal with that problem, because if they raise taxes or cut spending they get booted out of office! As expected, they are more concerned with holding on to their jobs.
So how is our government going to deal with this problem? The same way governments have dealt with this problem throughout history – they print money.
By printing money they inflate the currency, and pay off the debt with cheap dollars, and while that may be good for the government, it is terrible for investors.
When the government prints money, people who saved their money and people who invested in fixed income, bonds and other liquid assets get hurt badly. In some cases they can get wiped out.
And what’s worse – this time around, the government is artificially keeping interest rates at zero until early 2015 so they can keep inflating our currency without much backlash.
Ask yourselves a few questions:
- When was the last time you remember not being able to get any interest on money in savings accounts?
- When was the last time you remember the 10-year treasury at below 1.5%, or corporate bonds at 3%?
- When was the last time you remember the Federal Reserve printing $40 Billion a MONTH, without end, (which they are now doing and calling it “QE-3”)?
So how do you protect against inflation? — WITH HARD ASSETS – and frankly, there is no better hard asset than real estate. Unlike gold or commodities, real estate can generate current income and grow in value with inflation – it has historically been used to generate cash flow and capital appreciation, and is also considered a hedge against inflation.
We are living in unprecedented times, and these events will create risks for some, and opportunities for those who prepare.