Anyone following this site knows that I believe that Keynesian economics, especially as practiced by the political class, is wrong. In effect, during the 1930s we jettisoned sound economics and shifted to an incorrect paradigm that has been in force since. The application of this “medieval witchcraft” enabled governments to grow beyond reasonable size and become indebted beyond the possibilities of repayment. Politicians seized powers they should not possess and created business cycles that were unnecessary.
As a result of economic abuse over these many decades, we find ourselves in an economic crisis from which there is no escape save government default and/or hyperinflation.
A new book entitled Where Keynes Went Wrong raises the following issues:
“… should we be relying so completely on Keynes? What if he is wrong? What evidence is there that he is right?
These are important questions. If Keynes is wrong, then so are the economic policies of Barack Obama, George W. Bush, and virtually all world governments today. Instead of giving us a sustainable economic recovery, they will just lead to inflation, bubbles, and crashes.”
While I have not read the book, a review can be found here.
Go Long Tar, Feathers and Rails
Is This It? Or Can They Fool Us Again?
"Paper money has become like fog on a warm morning."
Good Bye Welfare States and Government as We Know It
What’s the average American to do? I stumbled across your site and have been following you for a few weeks now. Is there no hope?
Marsha,
The most difficult part of this situation is knowing the twists and turns it will take. The two likely endings are 1. Very High Inflation (likely hyperinflation) or 2. A Deflationary Collapse of the Economy.
The government at this point is trying to “reinflate” the economy and blow more bubbles. That does not mean they will accomplish said goal. Furthermore, it is no solution and eventually makes things worse. If you believe they can succeed, then the stock market might be OK as an investment. To the extent that they are successful, we end up with scenario 1.
If they fail, then the economy implodes into a Great Depression type economy, scenario 2. That means stocks are a terrible place to be.
Of course these are two general classifications and there are various permutations and combinations of them. For example, scenario 1 might be preceded by a collapse in the dollar which ignites the inflation. Scenario 2 might be triggered by a collapse of the financial system (we are not beyond this possibility yet).
Of course it is also possible to have a deflationary collapse with hyperinflation occurring simultaneously. Death by both fire and ice.
If I had to select either scenario, I would choose the deflationary collapse. While that would raise joblessness temporarily, it would not wipe out all the savings and wealth of the middle class of the country. Without intervention, wages would fall and employment would recover rather quickly. It is doubtful in our day and age whether any government can just stand there instead of just do something.
There is no way to protect yourself against a hyperinflation, PERIOD! Your savings and wealth will be destroyed, just as it has been in every society that has experienced such a condition. Ultimately that is where I fear we end up, even though we might go through scenario 2 to get there.
My attempt to protect myself and family is to get out of as many dollar-denominated assets as possible. Precious metals is one way to achieve this. Foreign stocks and bonds are another. Foreign CDs denominated in other currencies also work. In addition I lean toward products/commodities that will be bought under any and all circumstances. Food, fertilizer, etc. Oil will benefit if the dollar drops, but is primarily and industrial product. Industrial demand is apt to fall off dramatically in any end scenario. Thus I favor gold over silver and silver over oil. Silver has an industrial as well as a currency demand, oil is all industrial.
If I were younger, I might consider emigration alternatives.
Sorry not to be able to give you a simple answer. The situation is complex and changing.
Hope this at least provides you some ideas. None of it is intended as investment advice. See a qualified financial counselor for such advice.
Monty