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Senior Contributor

The Federal Reserve current Economic/Money Supply actions and how to Protect your Family

 

I think it would be good to discuss on how is the best way to protect your families stored wealth and not let the Federal Reserve's current money-supply expanding policy damage what many of us have worked hard over the last 25 years to achieve in relation to assuring our families economic sercuity. Looking at M1, M2, and M3, which are measurements of our countries money supply it is obvious that they have been running the money printing machines overtime. Just basic economic theory would say that eventually this will result in a much higher inflation rate down the line in the future. I believe that this will occur in the future. One result of inflation is that it robs people of there stored wealth "Behind the Scenes". You don't actually write the goverment an "INFLATION CHECK", like you do to pay your taxes. But if you have a 15% yearly inflation rate, and all you do is keep your money in say 5% Bonds, you are losing 10% of your net worth/stored wealth per year to this inflation. The goverment is really just taking your money to pay back the debt they have created with cheaper dollars. So really all inflation is, is an additional tax on your family, above and beyond the income, state, and property taxes we already pay. So the main goal is how to insure your families net worth/stored wealth is not taken by the Federal Reserve to pay on this large debt-load that they have created. With all that said, I think it would be excellent to discuss what measures that a family can take to protect all this "STORED WEALTH" that we have accuminulated over the past 25+ years. Any thoughts on how the best way is to protect our families from losing all this "STORED WEALTH" to a possible 10 to 20% inflation rate that we may see in the future???

All ideas and thoughts will be relavent, and someone may have an idea on this issue that we have not thought about.

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Veteran Advisor

Re: The Federal Reserve current Economic/Money Supply actions and how to Protect your Family

let me guess.......own farmland

 

and you own farmland

 

wow

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Senior Contributor

Re: The Federal Reserve current Economic/Money Supply actions and how to Protect your Family

Many years ago, my old neighbor, an imigrant from Germany after WW1 said that " After all the inflation was over in Germany after WW1, the only people who had anything left were those who had assets like land. It was these conditions that caused the German people to accept a despot like Hitler.

Unless there is a change in thinking in this country, I fear for the future. I may not be around to see it

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Advisor

Re: The Federal Reserve current Economic/Money Supply actions and how to Protect your Family


@old man wrote:

Many years ago, my old neighbor, an imigrant from Germany after WW1 said that " After all the inflation was over in Germany after WW1, the only people who had anything left were those who had assets like land. It was these conditions that caused the German people to accept a despot like Hitler.

Unless there is a change in thinking in this country, I fear for the future. I may not be around to see it


I agree with Old Man, and with those who believe land is worth owning, it appears that

those who spent their lives farming farmers, have a different opinion.

 

 I guess the way to insulate oneself from what will soon be upon us (and already being experienced by many) is upward mobility and financial security provided by borrowing money for a higher education in liberal arts so they qualify for a government "job".

 

 Well those days may be ending also.  What follows is an exceprt taken from zero hedge, which discusses that education once provided a great life in this country, but those days are almost gone.  That does not work anymore.    John

 

College Grads: It's a Different Economy

 

The economy has changed in structural ways; preparing for the old economy is a sure path to disappointment.

 

Millions of young people will be graduating from college over the next four years, and unfortunately, they will be entering an economy that has changed in structural ways for the worse. It's easy to blame politics or the Baby Boomers (that's like shooting fish in a barrel), but the dynamics are deeper than policy or one generation's foolish belief in endless good times and rising housing prices.

 

1. Getting a college degree, even in the STEM (science, technology, engineering and math) subjects, no longer guarantees a job. As I have often noted, producing more graduates does not magically create jobs. The economy can only support a certain number of jobs in any one field. Producing 10 times as many graduates in that field does not create 10 times more jobs.

 

According to this analysis of supply, employment, and wage trends in information technology (IT) and other high-tech fields, Guestworkers in the high-skill U.S. labor market (via B.C.), only half of those graduating with STEM degrees get jobs in STEM fields.

 

Interestingly, 36% of IT workers do not hold a college degree, and only 24% of IT workers have a four-year college degree. As one would expect in a nation with a strong tradition of immigration, many "guest workers" (i.e. people seeking citizenship via working in the U.S.) also have degrees in the STEM fields.

 

This report Where are the STEM jobs? (via B.C.) predicts 8.65 million STEM jobs in the U.S. by 2018, which is a mere 6% of the current workforce of 142 million.

 

2. Those millions of Baby Boomers clinging to their jobs can't afford to retire, partly as a result of Federal Reserve bubble-blowing and zero-interest rates. Now that cash earns nothing, having a $300,000 nestegg of lifetime savings generates only enough interest income to pay a few bills. In the days before the Fed manipulated the economy to serve the interests of the banking cartel and the state, such a sum would earn roughly $15,000 a year at 5%.

 

Those days are gone, thanks entirely to the Fed, which is blowing new asset bubbles and engaging in unprecedented financial repression, distorting the entire economy in self-reinforcing negative ways.

 

It's easy to blame Boomers for buying into the fantasy of ever-rising real estate, but it's not a generational issue; plenty of Gen-Xers also drank the "housing never goes down" Kool-Aid. The issue is: who inflated the bubbles with lax oversight, easy money and low interest rates? The Fed and the U.S. government's housing and financial oversight agencies.

 

3. Many of those Boomers clinging to jobs are doing so to support you. Yes, it's a fine irony, isn't it? If you got a decent full-time job, Mom and Dad could stop sending you money for rent, gas, etc. But since millions of Boomers have to keep their jobs to be able to support their unemployed offspring, there are fewer openings than there would be if Boomer Mom and Dad could quit and retire.

 

4. We now have a bifurcated economy: we have what's left of the open-market economy and we have the cartel-state economy of various rentier arrangements. A rentier arrangement is one in which the input costs can keep rising due to political power/protection while the output declines.

 

Our economy is now dominated by rentier arrangements. This is one of the core reasons it is stagnating, the other being a parasitic, corrupt financial sector that depends on phantom collateral and accounting trickery for its survival.

 

Rentier arrangements include the financial sector (hated by the public but politically sacrosanct), the National Security State (you can never have enough people spying on the world, including Americans), healthcare (costs triple while the availability of care and the health of the populace decline) and education (college tuition rises 600% when adjusted for inflation but a third of the graduates learned essentially nothing).

 

Protected from the discipline of the market, these quasi-monopolies vacuum up an ever-increasing share of the national income while their output/yield declines. Where $200 million bought four top-line fighter aircraft a decade ago, now it buys one; we have reached the point where we can't afford our own fighter aircraft. And many in the military conclude the $200 million-each F-35 Lightning (by some estimates of full program costs, $300 million each) is an underpowered, bug-ridden dog, less capable than competitors and the aircraft it replaces at four time the cost, the F-18 E/F Super Hornet.

 

For decades, those entering the rentier cartels were assured of lifetime security. Get a job in healthcare or education or the defense/national security sectors, and you had it made. But these bloated rentier arrangements are bankrupting the nation.

Lacking any limit on their cost inputs, these sectors have expanded at rates far exceeding the growth rate of the economy that supports them. Healthcare once absorbed roughly 5% of the economy; now it is consuming 18% and is on track to consume 20%. Healthcare alone will bankrupt the Federal government and the economy.

 

As a result, employment in the rentier arrangements will be less secure going forward. Right now, the Federal government can borrow $1 trillion every year because the Fed has manipulated interest rates to zero. At some point, rates will rise (for one reason or another) and the "free money" will become costly. That will eventually limit the state's ability to fund its favored cartels and rentier arrangements with borrowed money.

 

5. The private-sector economy is bifurcated as well. The sprawling global corporations can draw upon talent from around the world, so competition for those big-bucks corporate jobs is fierce. Small business, under pressure from higher taxes, global competition and skyrocketing healthcare costs, cannot afford to hire anyone who can't generate a net profit for the company on day one--if they hire anyone at all.

Mentoring, on-the-job training, all of that good stuff--everybody wants somebody else to have given you that. They want you productive on day one.

 

6. The older generations will have to adjust to demographic and financial realities. That the promises made for Social Security and Medicare cannot be kept is "obvious," but so politically dangerous that we cannot discuss this truth openly. As I have maintained for years (Boomers, Prepare to Fall on Your Swords June 2005), the Baby Boomers will have to let go of the impossible promises made to them by an expansive Savior State. If they refuse to do so voluntarily, then the younger generations will have to insist via political means.

 

Or we can passively do nothing and watch the whole entitlement system implode. That works, too, but it's messier than just dealing with demographic and financial realities.

 

7. There are two sets of laws now: one for the Elites and the state, and one for the rest of us. If you wonder why small business growth has shriveled, look no further than the over-regulated, legalistic thicket that awaits anyone starting or operating a business. It no longer makes sense to have employees; contract workers or arrangements between sole proprietors is the only way left to do business for most of us.

 

The rule of law has been undermined by corruption, political favoritism, and mindless regulation. That systemic failure leads to stagnation and cynicism.

 

8. We are a free-lance nation. Many people bemoan this, as they want everyone to have the security to be unproductive and never be fired. But that's the problem with the entire rentier cartel-state economy: cartels are skimming operations that are immune to market discipline or any limits on their cost structure. Incompetence has no cost in cartels, and neither does inefficiency.

 

These bloated fiefdoms and cartels keep growing while the economy stagnates, increasing their share of the national income at the expense of the rest of the economy (and there is an opportunity cost to this malinvestment--what else could we have done with these trillions squandered on rentier arrangements?). The cartel-state economy will collapse under its own weight.

 

There are opportunities, but they require a deep understanding of risk and security. A livelihood with day-to-day low-level insecurity and volatility is actually far more stable and secure than the cartel-state one that claims to be guaranteed.

The burdens of Fed manipulation and the cartel-state rentier arrangements will come home to roost between 2015-2017. Those who are willing to seek livelihoods in the non-cartel economy will likely have more security and satisfaction than those who believed that joining a rentier arrangement was a secure career.

 

There is a price to joining a parasitic rentier arrangement, a loss of integrity, agency and independence. Complicity in an unsustainable neofeudal society has a cost.

 
 
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Senior Contributor

Re: The Federal Reserve current Economic/Money Supply actions and how to Protect your Family/Ray

Well, in the high inflation times of the early 1980's the value of an acre of good quality farmland dropped from $5,500/acre to $1,000/acre. A drop of 5.5x the orginial price from 1981 to 1986. So looking at this statistic, I would say farmland was the worst possible place to put your families money, wouldn't you say? If you owned 2,000 acres of Iowa farmland in 1981, it would have been worth $11 Million dollars, after the high inflation of the 1981 to 1985 time period destroyed the value of your families net worth in farmland from a high of $11 Million in 1981 down to only $2 Million in 1986. Boy, putting your money in farmland in 1981 to protect your family assets from 15+% inflation was the absolutely worst thing you could do, don't you think? Anybody who did this in 1981 to protect there family from the high inflation of the early 1980's should have been shot, don't you think? To flush $9 Million dollars of your families money down the toilet by trying to use farmland as an inflation hedge against the early 1980's high inflation rate was perhaps the most stupid thing a guy could do, don't you think? Only an idiot would have tried using farmland as an inflation hedge during those 4-5 years of high inflatin in the early 1980's.

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Senior Contributor

Re: The Federal Reserve current Economic/Money Supply actions and how to Protect your Family

Excellent article/post Faust. The part about a College Degree is very relavent to me with 3 kids headed off to college. Looking at my daughter's college education at a good, highly rated Nursing College, it will cast me $200,000 for 4 years of tuition, room/board, books, and spending money. She showed me the beginning salaries of a 4 year RN Degree nurse here in the Twin Cities is around $67,000/year today. Not too bad for a 22 year old girl just out of college. Assuming without any college degree she could get a $30,000/year job, the payback time of the $200,000 in college costs is around 5 and 1/2 years. But no, there is no sure thing that she will get hired as a nurse in 4 years after she finishes college. All she has is a piece of paper giving her the "RIGHT" to apply for the 4 college years RN job openings. Maybe there will be an oversupply of nurses in 4 years and she will not find a job in her field. I just don't know, what the future will hold in 4 years when she finishes college. So yes, the $200,000 I will spend for her 4 years of Nursing School is a gamble, so the article is correct. I perhaps am still going with the "OLD RULES" that a college degree in a field such as nursing will payback the cost in the long-run, but as your post says: THE RULES OF A COLLEGE DEGREE ARE CHANGING. If only I had a crystal ball to look 4 years into the future, but I don't!!!!!!!!

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Honored Advisor

Re: The Federal Reserve current Economic/Money Supply actions and how to Protect your Family

Actually, your $200 K only buys that kid the chance to qualify to take the NCLEX. You can spend all you want:if they do not pass licensing exams, it is a waste. Certain types of misconduct can boot you put of the professions, before or after you get licensed.

There has bern a lot of hype about unlimited opportunities in nursing, as well as certain other professions. The truth is, it is anybody's guess. Nursing is a brutally hard occupation...I hope she loves it. Otherwise, it will be a harsh living.
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Senior Contributor

Re: The Federal Reserve current Economic/Money Supply actions and how to Protect your Family

The overall plan is for her to work in nursing and then find a Doctor to marry and quit her nursing job. I am hoping she can marry a Radiologist, these are one of the highest paid Doctors and a $750,000/year salary is not uncommon in this very specialized field of medicine. So the "REAL" Goal, is for her to work 4 years as a nurse, marry a rich Doctor and quit the nurse job.

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Veteran Advisor

Re: The Federal Reserve current Economic/Money Supply actions and how to Protect your Family

just so you know....rsw......I have absolutely no problem with the land investment theme

 

but don't you think you are kinda "preaching to the choir" on this website

 

I suspect there are a lot of folks who have 75-85%+ of their net worth in land

 

they probably should be thinking "diversification", but that ain't going to happen

 

you might even be the poster boy for that idea, right??

 

what are you pushing 90%+ of your net worth in land??

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Senior Contributor

Re: The Federal Reserve current Economic/Money Supply actions and how to Protect your Family

Yes Ray, I am a poster boy for owning farmland, I have at least 80% of my net worth invested in Farmland.

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