Inflation

When a country devalues its currency, the consumer sees that change in value as inflation. We need to keep inflation in the back of our minds as we talk about the potential impact of the Trump administration because a lot of inflation is already baked in to our economy.

The analysis about inflation is really quite simple. The United States of America’s debt has doubled under the Obama administration and is now at a level that when interest rates revert to anything close to a more normal level, the government of the United States of America cannot afford the interest payments on its debt.

Countries do not go bankrupt but they devalue their currencies. Doing so makes servicing debt easier because it is being repaid with devalued currency, in our case the Dollar.

In order for the United States to be able to afford its current debt, the value of the Dollar would need to decrease by one half. That means an inflation rate of 100% (prices will double). The question is not whether inflation (devaluation) is coming. The questions are when and whether the devaluation/inflation will be all at once or over a period of years.

That is why investment gurus like Bill Gross, formerly of PIMCO now of Janus Funds, has been encouraging people since January of 2016 not to invest in stocks and bonds but rather in hard assets, such as land and gold.

In these uncertain times, it is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is land.

Are you ready?