How To Protect Yourself From The Inflation To Come

From the vast and thus far endless spending of the U.S. Federal Reserve and that of other governments around the world, inflation will soon confront us.

Stock markets are skyrocketing, as are commodities prices as bankers, awash in a tidal wave of cheap money have begun widely speculating much as they did before.

Realizing the consequences, China, soon to be the world's 2nd largest economy has begun tightening credit, raising interest rates and demanding its banks slash their lending, holding more of their funds in reserve.

But in America, as "too big to fail" banks wildly speculate or loan to those who wildly speculate, as we just saw, when defaults happen, they demand bailouts. Meanwhile, acting with the fiscal responsibility of a drunken sailor, the U.S. continues flooding money into bailouts and stimulus, weapons and wars.

To pay for this, it is on a borrowing binge. But half of its debt is now held by foreign investors and fearful of U.S. future inflation, for new loans they often insist on TIPS {Treasury Inflation-Protected Securities], meaning the U.S. will protect them from inflation, taking on vast open ended liabilities.

Here is what you can do to also protect yourself. If you have savings, commit them only short term, for during 2010, interest rates will rise and you'll be paid more. If you are a borrower, borrow long term fixed rate while that cheap money is there for you. If you're going to refinance your home for example, do it now.

If you want to ride the wave of inflation to come, select a highly reputable hedge fund that is forming such a fund. They already exist and more will come.

The inflationary consequences are ugly. But together we will get through it, much as people did during the Great Depression and as a result hopefully we will build a more compassionate nation and one that takes fiscal responsibility seriously.

Dick [updated 1/14/10]