Aftershock: Protect Yourself and Profit In The Next Global Financial Meltdown, Second Edition

Think Like a Foreign Investor: How Much of This Will They Take?

As we write this in early 2011, many people—including many foreign investors—are still expecting to see a significant recovery soon. Some believe the recovery has already started. How long this optimism will last depends heavily on how much money the Federal Reserve will print and the federal government will borrow (as described in Chapter 3).

When investors became disillusioned in 2009 and 2010, the Fed came to the rescue with money printing to boost the stock market and stimulate the economy. This cheered investors greatly in 2010 and may continue to cheer investors well into 2011. The problem, as we have said again and again, is that this stimulative money printing is clearly not sustainable and in time will have to end. And even worse than merely ending, this short-term stimulus will create a very big long-term problem: inflation.

As inflation nears 10 percent, investor optimism will start to seriously evaporate and a significant minority of foreign investors will begin to reduce their U.S. dollar exposure. What looks okay now will look much worse when inflation begins.

What Is the Repayment Plan for the National Debt? 10 Years? 15 Years? 20 Years?

Well, as everyone knows, there is no repayment plan. What a country! Borrow all the money you want, and you don’t even need a repayment plan!

This question is like asking what our credit limit is. It’s very useful for understanding our national debt. So, since we don’t ...