The middle class could very easily get wiped out over the next few years. For example, if you have saved one hundred thousand dollars in your 401k or IRA or CD’s, it has lost 15% of its value against gold in just the last two months. At that rate, your savings will be worth ten thousand dollars at the end of 2008 and one thousand dollars at the end of 2009. Wiped out!
The Cause of Inflation
At the very center of the inflation problem lies the US economy. In an attempt to revive the US economy, Ben Bernanke and the Federal Reserve are increasing the money supply so fast that the dollar is losing value with currencies around the world. But because the dollar is the Reserve Currency of the World Bank and many currencies around the world are pegged to the dollar, each nation is forces to increase their money supply in order to try to keep their currency from rising against the dollar - to protect them from a decrease in economic growth. The result of this global currency inflation experiment is causing a great number of people around the world to become poor – as their savings are reduces to worthless.
Yet, Federal Reserve Chairman Ben Bernanke told Congress yesterday that the nation is "not anywhere near" the dangerous stagflation situation that prevailed in the 1970s. Ben is correct, in that, we are facing a lot worse situation then the 70’s. We are approaching an inflationary crisis like never before – on a global level.
Reference Video: Rich Dad 2008 Predictions - Part 4
Once in a Lifetime
In the 70’s, gold increased 24 times its value, from $35 an ounce to $840 an ounce. If today’s economy were to follow a similar path starting at $280 an ounce in 2000, then we could see $6700 an ounce by 2010. If you have the stomach for the commodity markets, this could be your once in a lifetime opportunity.
If fact, the opportunity could be much greater today because of the massive increase in paper money available in the world today vs. in the 70’s. There are trillions of dollars that were simply not in circulation as they are today. As people around the world realize their currency is devaluing, they are piling into gold. The only question that remains is when to sell gold and reinvest in the stock market and real estate. Gold has the potential to create millionaires. Hypothetically, if you had invested $50,000 in the year 2000, you might be able to sell in 2010 for a whopping $1,000,000.
(Please consult a licensed professional about your investment decisions, like Peter Schiff at http://www.europac.net/ )
Re-Educate the Public
What we really need is a new financial education. Yesterday, Bush said he would veto the proposed congress bailout plan for homeowners, because it would do more harm than good by increasing interest rates. He said people need to understand the financial decisions they make. The problem with that is 'how can they, when they have no financial education'. Most of the US public schools don't teach any financial education, and government social programs diminish the need for financial education and we have just gone through a very prosperous period with easy money coming from home equity loans and credit cards – which also provide little incentive for financial education. The only thing the public has been taught is how to spend money.
Perhaps the government should create a program to re-educate the public with respect to financial matters, by adding classes to high-schools like,
- How to balance a checkbook
- How to read a bank statement
- How to manage a credit card
- How to plan for large purchases
These classes are what we need to re-educate the public about financial matters. If the government wants to create more programs, public financial education would be a good investment.