BUT – I don’t think I drive home just how important the inflation hedge is, or just how inevitable massive inflation is.
We have over $30 trillion of federal debt now, and the interest on the debt and the cost of all of our entitlement spending (Social Security, Medicare, etc.) will soon exceed ALL tax revenues (this is before accounting for defense and all other discretionary spending for day to day government functions).
This is both because baby boomers are retiring in droves now and because our federal debt is climbing faster than ever because of our massive federal deficits ($1.4 trillion in FY 2022 alone).
And no, we can’t raise taxes enough to cover our deficits or pay off our debts because there is not enough wealth in the world to do so and raising taxes that much would effectively destroy the economy that generates those tax revenues.
Hence, the only choice is to “monetize the debt” or to print our way out of this mess – and that means massive inflation at some point.
This is exactly what the federal government did in the 1940s to pay off WWII debt, and inflation hit 14% to 19% (depending on the source).
We have much more debt and far more entitlements now, so I expect to see much higher inflation rates (far higher than anything we are seeing now).
The ultra-wealthy know this and that is why they are still buying up farmland, precious metals, and other sophisticated inflation hedges – as they are clearly aware of this threat.
I blogged about it in fact in July, when I discussed the real reason Bill Gates is buying up all of America’s farmland.
Most Americans can’t afford to buy farms and many inflation hedges, but they can afford to buy one of the greatest inflation hedges there is: a house!
And – once inflation sets in with a vengeance (and it absolutely will) every American who could have bought a home, but decided not to, will greatly regret it.
Jay Voorhees
Founder | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
