“The Great Inflation of the 1970s destroyed faith in paper assets, because if you held a bond, suddenly the bond was worth much less money than it was before.” — Ron Chernow
There are many things going on in the world right now, including multiple wars.
We’ve also had the fastest increase of interest rates in the last 40 years.
This chart shows how inflation is still going up with no sign of going down.
We saw this also in the 1970s, which was a time of super high inflation.
What do you do if you find yourself suddenly thrust back in time?
How can you take advantage as an investor?
Can you protect your wealth?
We’re going to talk about all that and more in three steps.
Let’s jump into it!
1. Welcome to the 1970s
We’ve stepped back in time to the 1970s.
Back then, we had all kinds of issues.
Inflation spiked from 3.7% to 15% in the 1970s, specifically in 1973.
Energy prices were up in the 1970s.
The price of oil increased 700% by 1980.
This happened through the Middle East embargo.
There were global conflicts going on such as the Vietnam War.
Now you may be wondering: What caused all the financial issues in the 1970s?
Bruce MacLaury wrote an article talking about the different causes.
He pointed out four things:
Inflation, recession, the energy crisis, and questions of financial stability.
Let’s compare this to our current situation:
We have inflation, recession, an energy crisis, and questions of financial stability.
Welcome back to the 1970s!
In 1971, Nixon took us off the gold standard.
Since then, we’ve had runaway debt.
There was no accountability.
There was no limit to spending.
An incredible amount of inflation has come from that.
2. What’s Happening Now in the US?
Similar to the 1970s, there are multiple financial issues going on today in the US:
Inflation, recession, an energy crisis, and questions of financial stability.
We’ve seen raising interest rates 11 times since March 2022.
In September 2023, the official inflation number went up to 3.7%
(Unofficially, on Shadow Stats, the number is more like 7% to 8%.)
No matter how you measure inflation, it’s going in the wrong direction.
The prices have not come down.
That’s the thing about inflation:
If inflation rises, you need disinflation for prices to actually come down.
That doesn’t typically happen.
It appears the Fed is actually trying to cause a recession.
You might be wondering:
Why in the world would you want to cause a recession?
The short answer is that a recession will bring down inflation.
You could say they’re trying everything they can to battle inflation.
In the States, we’re currently experiencing questions of financial stability.
We’ve seen incredible fiscal irresponsibility.
The deficits are significantly rising.
The planned shortfall is expected to be around $2 trillion per year.
You can see in this chart that the debt right now is around $32 trillion.
We’re expected to increase the deficit by at least around $20 trillion over the next 10 years.
We’ll go from $32 trillion to $52 trillion.
That’s some incredibly high deficit spending!
The debt payments will be over 10% of total US GDP in 10 years, depending on the interest rate.
If interest rates are lower, there is less expense.
If interest rates are higher, it gets harder for us to manage our own debt.
Debt to GDP will continue to rise.
They say total debt will reach 181% of GDP by 2053.
That might be a conservative number, and the percentage could be actually much higher.
Next, there are the energy prices:
Anytime a world event occurs, like what happened recently in Ukraine and Gaza, OPEC decides they’re going to produce less oil.
Prices start to go up.
There’s a huge underdevelopment in oil drilling.
That’s one of the businesses we’re involved in.
No matter how green we want to be, we’ll need oil and gas.
3. What to Do About It?
We’re reliving the 1970s.
What should you do about it?
Get yourself in the mindset to take advantage of what’s happening.
Even if there is distress in the market, there is always opportunity.
The biggest way to do this that I’ve found is going from paper assets into real assets.
Paper currency, tangible or in bank accounts, is losing value.
We’ve seen that the last couple years.
Prices have gone up almost 50% across the board in the last three years.
Go to the grocery store and see for yourself!
Buy real assets like real estate or precious metals or get into cheap debt, if you can find it.
If the interest is below the rate of inflation, you might even find some long-term debt that makes sense for you.
Keep your eyes open.
Make sure you are open to opportunities that come out.
My friend Mark Moss says there are three certainties in life:
Death, taxes, and inflation.
Inflation is a certainty.
They’re going to create more currency.
How you take advantage is up to you.
People are starting to lose faith in paper assets.
They have value because we say they have value.
I encourage you to have a plan.
Whatever your plan is, stick to it!
Now I want to hear from you.
What real assets will you invest in to take advantage of inflation?
Let us know in the comments!
Before you leave, make sure to check out our special report about inflation investing. It shares the best choices to invest during an inflationary environment.
If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.
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Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions.