Inflation 2010s
Increases in the money supply
announced by the Federal Reserve Bank will begin to accumulate and should lead
to 10% inflation over the coming years. Increased
the money supply will be the only way to pay for the high level of US
government spending. The US government will
not be able to borrow near the levels of the coming government deficits,
already 10% of US income. Taxpayer
support for failing firms and “free” medical care will increase government
deficits.
The 10% plus inflation over the
coming decade has some advantage. It
will solve the mortgage/debt crisis by cutting debt by 1/3. Every dollar of debt will be worth only 38
cents after 10 years of 10% inflation.
Private funds can be put into money market accounts that
will keep up with inflation. Treasury I
bonds are indexed to inflation. Real
estate should be a good investment over the coming decade of inflation.
Stock prices will depend on the particular industry and government
support is as a signal for economic loss. Some industries will do fine while others were
in trouble before the stock market collapse and will not recover.
The recent stock market collapse was a correction to the
speculative bubble that began in the 1990s.
Given normal economic returns starting in the 1950s, stock prices in
2009 are back to where they should be.
Expect slow appreciation of stock prices, not a dramatic return to the
bubble levels of the early 2000s.
Remember also that stock prices like all prices will have to rise 10%
annually just to keep up with the coming inflation.