In 2013, Expect to Pay More for Just About Everything

By

While quantitative easing (the creation of money out of thin air) may have been needed back when the U.S. economy was on the verge of collapse, at this point, more of it simply equates to asking for more trouble ahead.

As regular readers of Profit Confidential know, I have been very critical about quantitative easing. If the Federal Reserve continues to print more money as it buys $85.0 billion worth of bonds each month, inflation in upcoming years will be a bigger problem.

We have already established that the Consumer Price Index (CPI) reported by the Bureau of Labor Statistics (BLS) doesn’t show the entire picture of inflation. In November of 2012, the BLS reported that the CPI decreased by 0.3%. For the first 11 months of 2012, the inflation rate was 1.6%. (Source: Bureau of Labor Statistics, last accessed January 10, 2013.) But the reality is that the way CPI is calculated is obsolete. We all know inflation is running much higher than 1.6%.

Sadly, as inflation continues to take a toll on the pockets of Americans, the Federal Reserve plans to continue quantitative easing until the unemployment rate in the U.S. economy reaches 6.5%.

My question: how long will it take to reach the Fed’s target unemployment rate?

In December, total non-farm U.S. payroll rose by 155,000. (Source: Bureau of Labor Statistics, January 4, 2013.) If we assume 155,000 to be the average monthly job creation in the U.S. economy, keeping everything the same, it will take about 38 months to reach the unemployment rate of 6.5%. (Source: Federal Reserve Bank of Atlanta, last accessed January 10, 2013.) In other words, 38 months of more quantitative easing—or another $3.2 trillion of more money printing!

What does this means for inflation? You guessed it: prices will rise even further. Remember; more printing means higher inflation.

Thanks to quantitative easing, like many others, I believe the real inflation rate is actually multiple times of that officially reported by the BLS. Quantitative easing has been disastrous to savers and those who live off a fixed income. Slowly, by the inflation it creates, it is taking a toll on the pockets of more and more Americans.

While the question in the mainstream financial media remains—“When will quantitative easing stop?”—I think the damage has been done. If not today, then in the very near future, higher inflation caused by too much money in the system will be very damaging to the U.S. economy.

Where the Market Stands:

We’re close to the end of the line, my dear reader. The bear market rally that started in March of 2009 is close to putting a top in.

What He Said:

“Recipe for Catastrophe: To me, the accelerated rate at which American consumers are spending coupled with the drastic decline in the amount of their savings is a recipe for a financial catastrophe.” Michael Lombardi, Profit Confidential, September 7, 2005. Michael started talking about and predicting the financial catastrophe we began experiencing in 2008 long before anyone else.

Retire on one hot stock

Presenting Our Top Stock Pick for 2015!

It is one of the leading companies in its industry. With quarterly revenue of $800 million and growing this company is generating over $300 million every three months in free cash flow!

"A Golden Opportunity for Stock Market Investors" is yours FREE when you opt-in to get our daily e-letter Profit Confidential. With Profit Confidential you are receiving the opinions and commentaries of seasoned financial analysts and economists. We analyze the actions of the stock market, precious metals, interest rates, real estate, and other investments so we can tell you what we believe today's financial news will mean for you tomorrow!

Combined, we have over 100 years' experience in analyzing various investment markets. Our analysts include MBAs, BAs, B.Comms, P.Engs, MAs, LLBs...and most importantly, years of experience investing and managing our own money successfully!

To opt-in to our FREE e-letter Profit Confidential and to get your FREE report, "A Golden Opportunity for Stock Market Investors," enter your e-mail address in the box below. You can unsubscribe at any time.

We hate spam as much as you do. Check out our Privacy Policy.

About the Author | Browse Michael Lombardi's Articles

Michael Lombardi founded investor research firm Lombardi Publishing Corporation in 1986. Michael is also the founder of the popular daily e-letter, Profit Confidential, where readers get the benefit of Michael’s years of experience with the stock market, real estate, economic forecasting, precious metals, and various businesses. Michael believes in successful stock picking as an important wealth accumulation tool. Michael has authored more than thousands of articles on investment and money management and is the author of several successful investing publications,... Read Full Bio »

Related Articles

Video: Here is why you should be Bullish on Gold | By: Michael Lombardi

Poll

Would you vote for Donald Trump if he was the Republican Nominee?

View Results

Loading ... Loading ...
Profit Confidential
×
54.221.20.110
From: Michael Lombardi, MBA
Subject: Gold: The Stock Contrarian Investors’ Best Play of the Decade

Read this message