Dollar Decline = Lower Standard Of Living
With the official policy of the United States being “kill the dollar, create the illusion of prosperity” we can expect lower lows on the greenback (even if we get a short term bounce). The problem is that the Fed believes they have to weaken the dollar and create inflation in order to create “growth”. They may be right. But, the problem is that this growth isn’t really growth. It’s more a re-flation of the asset bubble that is trying to naturally deflate.
The biggest problem, that the majority of America is oblivious to, is that this dollar decline will annihilate the standard of living for so many Americans. For people living paycheck to paycheck, it is especially ugly, because more of your take home pay will have to goto your basic expenses such as food, utilities, gas, clothing, etc. Why? Because prices will go up.
Even if Bernanke decided to strengthen the dollar and raise rates, the economic “recovery” would grind to a halt. So, there is a lose-lose scenario for the Fed and other policy holders. In this scenario, they will always choose inflation, because inflation is more politically acceptable versus recession and people out on the street (wait, don’t we have both?).
No matter what happens, most Americans are facing a lower standard of living. On one hand, it is inflation-induced through higher prices. On the other hand, it is recession induced because of unemployment and deflating asset prices.
What To Do
Since both scenarios are ugly, you need to prepare immediately by getting your own financial house in order. Cut spending, get out of debt, and start saving money. Once you have a little money saved up, you will want to hedge against inflation by investing in some assets that will do well in an inflationary environment: multi-national stocks, commodities, TIPS.
Guys, the economic future is muddy at best. We could easily see unemployment remain high. Those of us who keep our jobs will find less opportunity which will mean not having the opportunity to earn bonuses. Day-to-day expenses could easily go higher from here: health care, gas prices, Cap-and-Trade taxation on your utilities bills. Not too much to get excited about.
Don’t rely on an employer or the government to improve your standard of living. Work hard at your job, but also work on building an additional income stream. Wouldn’t an extra $250 a month be fantastic? Or even an extra $1000? It is very possible. It just takes getting off your butt and doing it.