Long Term versus Short Term
Before we dive into the details of our three rules for protecting assets, we want to be very clear about the difference between the long term (most likely beginning sometime between 2013 and 2016) and the short term (prior to 2013). In the long term, rising inflation will eventually top 10 percent and higher. Eventually, interest rates will rise even higher. We believe that not long after inflation exceeds 10 percent, investor psychology will significantly change enough to fully pop all the bubbles, including the dollar and government debt bubbles. Prior to that occurring, in the short and medium term, inflation will be less of a concern and investor psychology will still be relatively good regarding most U.S. assets, with the exception of U.S. real estate, which will generally continue to decline.
Therefore, the long term is not the same as the short term. In fact, in the short term we may see the exact opposite of what will occur later, depending on how aggressively the federal government fights to stimulate the economy and save the dollar. As we have already pointed out, many of the government’s actions designed to stimulate the economy in the short term will only make things that much worse in the long term when the dollar and government debt bubbles finally pop. But in the short term, they can have a lot of temporary, short term benefits that many people will confuse with a recovery (which we certainly are not having).
Some of the most powerful ...