WHERE ARE WE HEADED?
President Obama is spending quite a lot of money we don’t have. To pretend we can handle the extra debt, he (and all the Presidents before him) is keeping the debt obligations of Fannie Mae, Social Security, Medicaid and Medicare off the federal books. The GAO – the Feds auditor- argues the US is on an ‘unsustainable path’. According to the GAO, the Congressional Budget Office and the Office of Management and Budget, within 20-30 years the mandatory spending for these entitlement programs will exceed tax revenues. This means that the entire budget of the United States will have to be borrowed. And it gets worse because the entitlements continue to grow, according to the GAO, to over 6 times the total tax revenue of the country by 2080. If we were to set aside enough money to cover the entitlement programs and current national debt until 2080, we’d have to park $53 trillion in an account someplace today. To give you some idea of how deep we’re in it, if we sold China all of the businesses in the US today, we’d get about $11 trillion right now. In other words, there is no possible way we can pay all of this without some kind of massive austerity program or a phenomenal wave of investment capital. And neither is even remotely on the horizon.
There is one other way, however. We can inflate our way out of the problem. And inflation, my friends, is a future we investors can count on.
Inflation is the rise in prices and wages created by adding paper money to the economy. Inflation can not be created by private people. It can only be created by a government printing press. To create inflation, the Fed lends money to banks who then lend it to borrowers. To get the money, the Fed simply prints it.
More in a day or so about what investments will do well in an inflationary economy. Get it right and you’ll get rich.
Now go play,
Phil Town
