Tuesday, July 11, 2006

Guns and Butter

I have been talking about inflation and the falling dollar for several years now. The two go hand in hand and there is nothing new about a government that wants guns and butter, but only wants to tax for one or the other. It always ends up causing inflation. And no, I don't advocate raising taxes to pay for both. I believe that we could pay for both if our wonderful elected representatives weren't so busy spending our tax dollars on boondoggles designed to get said representatives re-elected. Anyway, here's a short editorial from AlterNet on the subject:

"Ask George Washington what he thinks about fighting a war on credit. Back in his day, Congress printed money to pay for the Revolutionary War but neglected to tax anybody to back up this funny money of theirs. The bills were called continentals and in due course they lost all their value, hence the once-popular expression, "not worth a continental."

When your money is not worth a continental that means you are suffering from inflation big time. It happened 230 years ago in our War of Independence from the British. We are seeing it beginning to happen now in our war with, well, whoever it is we are fighting. We may not know the names, the whereabouts or the precise whys of the Iraq War but the costs are approaching a trillion dollars."

Read the rest....

If inflation continues to rise, we will be well served to have some short term, cash type investments as well as some commodity investments. Short term Treasury yields should rise with inflation and commodities tend to rise during inflationary times; Remember the 70s! Okay, that doesn't compare well with, "Remember the Maine!" or "Remember the Alamo!", and I wouldn't want anyone to hurt themselves by remembering something like disco, but the 70s are worth remembering for the economic mistakes that were made. Unfortunately, our government doesn't seem to be able to learn from it's mistakes, which means we have to prepare for the consequences.

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