Mad Money Machine

Hosted by Paul Boyer

What’s Up With Our Money?

I wish I would have made this video. It summarizes nicely what I’ve been saying on my show recently. The US dollar is dropping and has been for 100 years. It is the inflation tax.

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Sun, April 6 2008 » Gold

One Response

  1. wizkid April 7 2008 @ 11:43 am

    I think going back to the Gold standard is probably not realistic. Better to discuss the investment strategies relative to inflation (as the video does a great job of demonstrating with fuel and cars). Gold is only one hedge against inflation.

    Decade Assumption:
    http://inflationdata.com/Inflation/images/charts/Articles/Decade_inflation_chart.htm

    If you assume the next decade 2010 – 2020 matches the 1980’s of 5.55% what investment strategy would you take?

    Long Term Trend Assumptions:

    http://inflationdata.com/Inflation/images/charts/Annual_Inflation/annual_inflation_chart.htm

    Are we 4 years (starting in 2004) into a 15 year trend of rising inflation? If so the target Fed line of 3% or less is now in danger. What inflation assumption should the average investor now use in place of 3%? How about 5%?

    To complicate it more – Your inflation rate is different than my inflation rate (based on consumption patterns, age etc.). So can we even trust the CPI charts published? Each person should keep track of their own personal inflation (gas, beer, food – you know the staples). And DONT FORGET TAXES!!!

    Finally the brain teaser- from Edelman’s “The Truth about Money”. What must you earn to maintain your money’s purchasing power at 5% inflation and a 35% tax rate to break even?

    Answer: See the entire table (Figure 1-18) in his book

    a> 3.1%
    b> 4.6%
    c> 6.2%
    d> 7.7%
    e> 9.2%

    If your answer was d then you better retake the Risk Capacity Survey :)

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