Inflation, I Don't See No Inflation!
Research for Online Investors

by JohnDalt

6/15/09

Art Laffer, author of the Laffer Curve, observes that the Fed has increased the monetary base by almost $1 trillion since September 2008.  Monetary base is comprised of currency in circulation, member bank reserves held at the Fed, and vault cash.  This increase in the monetary base is the largest increase in fifty years, BY A FACTOR OF TEN.  No ma, we ain’t gonna have no inflation!

In 1947, during the boom after WWII, the median family income was $3,300, a house cost $6,600 and gasoline cost $0.13 per gallon. Twenty years of Keynesian economics, of Fed inflation, of government meddling increased annual income to $7,933, the average home cost $14,250 and gasoline cost $0.33 per gallon in 1967.

The U.S. went off the Gold Standard, and had to inflate the money supply to pay for the Vietnam War.  By 1987, median family income had inflated to $30,970, the average house cost $92,000 and a gallon of gas cost $0.89.

In 2007, median household income doubled to $60,200, gasoline cost $3.25 per gallon and a new house cost $212,000  For many families, achieving the “median” family income required two incomes.

In the above example we only went back to 1947.  I have sited before that under the Federal Reserve our dollar has lost 98% of it's value in the last one hundred years.  In 1908, gold was $20 per ounce.  Inflation, I don't see no Inflation!  I will keep looking though, and bringing you information to help you avoid the potholes ready to wreck your portfolio.

What will a dollar be worth in 2027, you can bet less than today.  I have called crude oil the trade of the year.  What will be the trade of the decade?  The trade of the next 20 years?  Look to the past, what increased in value faster than inflation?  Real Estate is good, but property taxes and insurance hurt the returns as an investment.

At Galt’s Long Term Portfolio, we are looking for investments to grow our assets faster than inflation is depreciating them. We want to invite you to join us. We work every day to protect your portfolio from short-term losses and the fiat of our government.

I was reading about developing the Arctic for oil and gas exploration. You may remember, a few months ago, the Russians planted a flag on the floor of the ocean to ‘claim’ the Arctic.

There are ongoing boundary disputes between the U.S., Canada, Russia, Iceland, Denmark, and Greenland.  The craziest part is with all of the U.S. environmental laws and consideration of aboriginal people and polar bears, it may be better if another country develops the natural resources in the Arctic!  This is what the regulators have done to America; they have hamstrung any progress so we cannot be competitive with other economies.

World oil consumption is down 2.9% this year, according to the International Energy Agency. The IEA estimates world oil consumption at 83.3 million bpd.  China reports their crude oil imports were at a 14-month high in May, a 5% increase over April.

Texas A&M Contest Winner defining "Political Correctness."

"Political correctness is a doctrine, fostered by a delusional, illogical minority, and rabidly promoted by an unscrupulous mainstream media, which holds forth the proposition that it is entirely possible to pick up a turd by the clean end"

--------------------- R. J. Wiedemann Lt Col. USMC Ret

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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