The Online Investing AI Blog

The new record breaking budget deficit of $1.8 trillion could have massive repercussions for the economies of this country and for the entire world. The future deficits are expected to rise. This deficit might be the straw that breaks the dollar’s back.

Image courtesy of The Heritage Foundation

There have been many factors that have been putting pressure on the dollar, going back nearly 100 years when the government started running a deficit. It’s been a free ride for the last century because the dollar was the default currency for the world. America was the most powerful economic superpower, and the only country that was a military threat was the USSR. It was like having an infinite line of credit; we could print as much money as we wanted.

What has changed?

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Great Books, Money, US Economy debt, deficit, economy, government, hyperinflation, inflation, Medicare, social security

The current administration has made it very clear that it is committed to helping the economy as much as possible. The trillion dollar bailouts have had a measurable effect, and most people think that the recession is over. Although the short term effects of the stimulus have been realized, many people are wondering about what happens after the effects have worn off.

More Failed Banks

This article from Reuters describes nine bank failures that occurred in just one day. The government has successfully increased spending and prevented a depression in the short term, but what about the real health of the economy? As bank failures reach record highs, do we need to be concerned about whether the entire system will collapse?

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Investing, Money, Success, US Economy bankruptcy, banks, economy, government, inflation, Obama, US

During a recent talk with a real estate lawyer, I received some surprising news.

According to the lawyer, with interest rates at historic lows, business has been buzzing. In fact, he and his assistants are working seven days a week and the closings are still backlogged. That’s the good news.

Here’s the bad: the industry went through massive layoffs during the recent downturn. Some former employees have drifted into new jobs and it’s almost impossible to re-train new workers in time.

And, it’s not just refinancing (that I was in the midst of). About 60 percent of the closings are acquisitions.

This is more good news, right?

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Investing, Money, Online Investing AI, US Economy bubble, economy, inflation, Japan, Money, real estate, recession, wealth

Spending was out of control;  now, it’s insanely out of control.

Every day shopping sprees are loading new debt onto the credit cards and are damaging credit reports.

And, despite the financial problems, the wish lists keep growing: Trips. Perks. Buildings. Programs. Gadgets. On and on.

Is this the budgetary excesses of one of the cast members of Real Housewives of New Jersey?

I wish. It’s the United States government and it’s looking increasingly like the ripples of massive spending and spiking debt have yet to reach the shores of the economy. But they will.

And what happens when they do?
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Money, Online Investing AI, US Economy austerity, credit, debt, government spending, inflation, spending, stimulus

Everyone remembers how things were so cheap once upon a time. “I remember when ice cream only cost 15 cents a scoop.” How often have you heard that sort of comment? The surprising thing is that since inflation happens slowly, we don’t notice the effect until a large amount of time has passed.

One detail that most financial advisors fail to mention is that inflation will destroy your savings. Most financial advisors will tell you that if you can get 8% return on your savings, you can retire in 40 years. I wouldn’t really trust that they can help me get 8% per year return. But even if they could, it would not be enough to retire on.

Why? Because a scoop of ice cream will cost $1,000. Right now, many experts are predicting that we will go into a period of massive inflation. This is because America is printing more money than ever. The rate of inflation is directly related to the amount of money that we print. Therefore, inflation is likely to increase in the near future.

The need to print money is largely fueled by the massive budget deficit. America doesn’t have the money to pay, so it just prints more. The bigger the deficit, the more it prints. And, it looks like we’ll be printing at record rates for the next few years.

It’s important to be aware of inflation, because it directly affects our finances. In just a few years the cost of housing and gasoline doubled. The same thing will happen again. If we do not double our income in that time, we will become much poorer. And our savings will drop in value by half.

This is the eighth post in a series entitled Secrets the Financial Industry doesn’t Want you to Know.

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Investing, Money, US Economy financial advisors, financial planners, housing, inflation, Investing, prices, savings, stock market

Many people have heard, “If you save $100 a month, you’ll be a millionaire.” Although this is true, it takes about 50 years. Who wants a million dollars in 50 years?

And, this idea ignores one small but thorny detail: inflation. Inflation will eat up that million dollars just as fast as it is saved. Because in 50 years a million dollars will not be worth much. Maybe it will be worth $10,000. Or $1,000. Or nothing.

So, what’s the point. The point is that inflation is rising right now, and most people are completely unaware. They believe when the government says, “Inflation is low.” This is simply a lie.

If you look at the price of food, housing, gasoline and energy its obvious that inflation is not low. And, if you compare the prices with 5 years ago, the dollar has lost half its value.

You will reach the same conclusion if you compare the value of a dollar with other currencies. Compared to the British Pound, Euro and even the Japanese Yen(!), the dollar has lost a large percentage of its value compared to 5 years ago.

The important thing to learn from all this is that our financial success is not determined by how much we can save, but more by how well we use what we save. That means how much money we can make from our savings. For most people, that means a CD or money market account. These investments pay much less than inflation, so the people who buy them are actually losing money. These investors are certain to lose money, so I suppose that makes it a low risk investment. You have a good idea how much you will lose when you get into the investment!

All this to say that people who save money, follow the conventional wisdom, and believe the government will get screwed. On the other hand, people who get educated, become successful investors, and find a better solution will succeed and have as much money as they want.

Investing, US Economy financial freedom, inflation, Investing, saving, US Economy