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Inflation Invasion; Bad Business:

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Good Morning Middle America, your King of Simple News is on the air.

U.S.NEWS: The stock markets rallied yesterday after Bronco Ben and the Inflation Five voted to lower the Federal Funds Rate by yet another 75 basis points or ¾ percent.

Life is good again in America and everything turned out fine. I’m sorry if I worried any of you with all my ramblings. Just kidding, my ramblings predicted weeks ago that the Fed would lower rates to 2% before they were done. Yesterday’s cut settled in at 2.25%, but will be cut to 2% at the next regular meeting, if not sooner.

This move was predictable as the Fed and the federal government pitches in to try and provide the best possible way for you to incur more debt. After all, America runs on debt. But first, they have to increase the value of your assets through inflation in order for you to gain equity to borrow against. Sounds like a reasonable plan to me.

Of course, there are casualties in economic wars. All of those folks who worked at Bear Stearns, who had say $200,000 in their retirement account last week, now have around $2300.00. About 30% of the stock in Bear Stearns was held by those who worked there.

The other heavy casualties are sustained by the elderly who have no ability to raise their income, yet inflation will drive their costs through the roof.

But, tough luck for the elderly they should have planned for 100% inflation and the kids can pay the bills; after all, that’s what we raised them for.

The bailouts of those poor CEOs on Wall who were scraping by on a few million per year is the main concern here. Always has been, always will be as long as the people will hold still for it; and that is forever. Don’t believe me? Revisit you presidential choices for November.

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So what does all of this mean to those of us who are not in the privileged class? It means that you should watch for a sale on a rice cooker and buy a fishing pole. First and foremost, the cost of living will rise very quickly and your wages won’t.

The first part of an inflation based recovery isn’t pretty, the last part is down right revolting. That being said, here is what to expect and a few things that you can do to brace yourself.

There are times when refinance makes sense and this is one of them. If you have good credit, I anticipate that you could cut expenses by refinancing to the lower rates that will soon be offered. This should apply only to those loans that you simply can’t find a way to pay off. Be cautious about refinancing costs, as the crooks didn’t all retire.

Take a long hard look at your current monthly bills and determine whether there are ways to cut back, at least until this mess levels out. Ever heard of hedge funds? Start your own by cutting back everywhere possible on non-essentials. I’ve covered this before, but Starbucks and new vehicles aren’t essentials.

If you have money in savings accounts, certificates of deposits, or other similar low yielding investment vehicles, your actual yield is negative. (Yesterday’s article).

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Move that money to pay debt on existing loans. Worried about not having any cash for emergencies? Take out a line of credit against your home as a hedge for instantly available emergency capital that only incurs costs and interest should you need to borrow money in a pinch.

Inflation pacing assets become mandatory in the coming months. Real estate will once more appear to climb in value as the dollar shrinks. Some areas will be very slow to recover due to past massive job losses and inflated inventories of housing and commercial property. You must be the judge of a particular area’s economic health.

Have some tips? Comment away.

 

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www.kingofsimple.com
Mike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics. The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, (more...)
 

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