Investing for Hyperinflation

/PRNewswire/ -- The National Inflation Association today released the following statement to its http://inflation.us/ members:

"Today, hyperinflation is the last thing on most Americans' minds because they can't see it yet and they don't know it's coming.

Imagine taking a bottle and putting into it a bit of bacteria that you can only see under a microscope. Now let's say this bacteria doubled in size every minute and after 55 minutes, you still don't see any bacteria. But then, five minutes later or one hour since the bacteria started doubling, the entire bottle is full of bacteria.

Massive monetary inflation is already taking place today. Nobody can see it yet because temporary forces have pushed consumer good and commodity prices down, which has tricked economists into believing deflation is the real problem.

However, almost every action President Obama, Congress, and the Federal Reserve take every single day is sowing the seeds for hyperinflation. You need to invest today as if hyperinflation is already here, because once it arrives it will be too late.

People often ask us, how to invest in gold and how much gold is too much to have. There is no such thing as having too much gold. Although you should never put all your eggs in one basket, it is much better to have all of your money in gold than to have it all in U.S. dollars. The U.S. dollar will inevitably return to its true value, which is zero. Gold will always retain its value; unless huge new gold discoveries are made, which is very unlikely.

Many Americans are afraid to invest heavily into gold because of its volatility. Today's volatility in gold is nothing but noise that should be ignored. Many short-term traders buy gold for the wrong reasons. They buy it as a safe haven from stocks, and when stocks rally they sell their gold to buy stocks.

These investors are obviously not aware of the Dow/Gold ratio, which we went over in our last article. Clearly, the Dow/Gold ratio is in free-fall and last time it was in free-fall it bottomed at 1. Meaning, 1 oz of Gold was worth the same as the price of the Dow. We are likely headed there again.

There are many ways to invest in gold. Physical ownership, which means you buy gold bullion in the form of bars or coins and store it yourself, is obviously one option. You won't get rich owning physical gold, but you will at least retain your purchasing power while most Americans lose everything. Remember, as gold prices rise, the gold itself is not increasing in value but the U.S. dollar is losing its value.

One of the problems with buying physical gold is the dealers that sell physical gold often charge large premiums. On eBay, 1 oz gold coins are currently selling for around $1,000 per oz, despite gold's current spot price of $875 per oz. Generally, if you buy a larger quantity of gold in the form of a bar, you will pay less of a premium. But, it might not be a good idea to store gold bars on your own and risk them being stolen.

We believe one of the best ways to invest in gold is through exchange traded funds and notes, otherwise known as ETFs and ETNs. On Tuesday we will be releasing an NIA report on ETFs and ETNs, discussing all of the different gold, silver, and agriculture ETF/ETNs we like along with the risks involved in purchasing them. We will also be discussing ETF/ETNs that allow you to short the U.S. dollar and treasuries.

The way to get rich during hyperinflation is to buy the right gold mining stocks. Gold mining has many fixed production costs and just a 100% increase in the price of gold, could mean a 1,000% increase in the profitability of a gold mining company.

When it comes to gold stocks there are top-tier miners, mid-level miners, junior miners and gold exploration companies. So far we have profiled mostly top-tier and mid-level miners, but our most recent profile is a gold exploration company that we believe could become a mid-level to top-tier miner in the future. Gold exploration companies have the greatest upside potential, but also the most risk. What you need to look for are gold exploration companies that have joint ventures with top-tier miners, which is the case with our latest profile."

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NIA Says Americans Should Prepare for Hyperinflation

/PRNewswire/ -- The National Inflation Association today released the following statement to its http://inflation.us/ members:

"The Federal Reserve's announcement on Wednesday to expand its balance sheet by $1.15 trillion puts our country on a direct path towards hyperinflation.

By spending $300 billion on long-term U.S. Treasuries, $750 billion on worthless mortgage-backed securities, and $100 billion on other federal agency debt; the Federal Reserve will be doing nothing more than printing $1.15 trillion out of thin air, which means Americans are guaranteed to see a sharp decline in the purchasing power of their U.S. Dollars.

Wednesday's news brings total funds allocated by the Federal Reserve and United States Treasury during the financial crisis up to $11.4 trillion and although only $2.8 trillion has so far been spent, we believe the full $11.4 trillion will inevitably be spent.

If the Federal Reserve simply allowed AIG to fail, the free-market would've efficiently reorganized the company in bankruptcy. The $165 million in employee bonus contracts, that Congress has been so eager to express outrage about, would've been wiped out completely. The failure of AIG would not have brought down the U.S. financial system. However, bailing out every financial firm on Wall Street will.

Federal Reserve Chairman Ben Bernanke commented this past weekend on 60 Minutes that our country's biggest risk is we don't have the political will and commitment to solve our current financial problems. We respectfully disagree with Chairman Bernanke and believe our country's biggest risk is hyperinflation, that will come as a result of the Federal Reserve's actions.

Up until now, the United States has been successful at keeping inflation somewhat under control by borrowing the money for much of its spending from China. However, China's Premier of the State Council Wen Jiabao said last week that he is worried about the safety of the U.S. Treasuries they are holding. By China publicly acknowledging their fears, not only is it possible China will stop buying U.S. Treasuries, but they could take advantage of the Federal Reserve buying U.S. Treasuries and use it as an opportunity to sell.

The U.S. Consumer Price Index rose in February by 0.4 percent, which equals an annualized inflation rate of 4.8 percent. We believe inflation would be much higher if it wasn't for all of the temporary factors driving consumer prices down such as the forced liquidations of hedge funds, de-leveraging of banks, going out of business sales of retail stores, etc.

These temporary factors will soon be gone. They are likely to end at the same time as the Federal Reserve begins printing trillions of Dollars and China potentially becomes a net seller of U.S. Treasuries. The perfect storm is ahead for massive inflation to begin in the second half of 2009. Being that our country already has an $11 trillion national debt and $55 trillion in unfunded liabilities for social security, Medicare, and other social programs; hyperinflation during the next decade is becoming less the worst case scenario and more the most likely scenario.

Our country's current financial crisis is a walk in the park compared to what is ahead. Despite rapidly rising unemployment rates, Americans today can still purchase very cheap food, clothing, and gas. We can't take this for granted and must prepare for what is ahead.

If you prepare for the worse, the best will always happen. Americans who begin preparing for hyperinflation now, not only could preserve their purchasing power in the years ahead, but could potentially become wealthy as Americans hoarding U.S. Dollars, bonds and other dollar-denominated assets lose everything. We believe there will soon be a Gold, Silver, and Agriculture boom that will make the dot-com and Real Estate booms look small in comparison."

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