How to Profit from QE2 (Quantitative Easing) – PART 1

By David Campbell On 11/22/2010 · 1 Comment · In Newsletter

Regardless of your political opinion about whether quantitative easing is good or bad for our country, the government is telling us they are printing dollars as fast as they can. The question is are you prepared to profit from this inflationary phenomena?

QE2 is a fancy term for “hidden tax on savers, seniors, and foreign nations for the benefit of the US federal government, banks, and owners of leveraged commodities.” If you know who benefits from, or is hurt by, quantitative easing (aka inflation), doesn’t it make sense to put your chips on the winning side of the equation? Rising prices makes private lending more attractive because as the price of a lender’s collateral rises, the loan to price ratio becomes more favorable (safer) to the lender. Rising prices make owning leveraged commodities such as positive cashflow real estate more attractive. As price of commodities rise with inflation, rents go up, real estate prices go up, and debt can be repaid with ‘cheaper dollars’.

I frequently talk about inflation because it is the most important economic force in our lives. It is by political design that very few people talk about or understand what is happening with inflation. Here are some excellent Youtube videos describing what is happening with inflation and the dollar – Quantitative Easing Explained, Glenn Beck: Just Realize What’s Going On – Part 1, Part 2, Peter Schiff on FOX news, The Attack On the Dollar by Richard Maybury.

High inflation in the United States in the foreseeable future is inevitable for the following reasons:

1) The federal government controls inflation and they have the most to gain from it. It’s like the fox guarding the hen house. Congress and the Fed have publicly stated their desired rate of inflation is a doubling of commodity prices every 15 years. This is one way for the US to fund their current budget obligations while staying ahead of the cost of interest on the national debt. If the US government is successful with their monetary agenda, a hamburger that cost $5 today will be $10 in 2025, $20 in 2050, and $40 in 2065. While it is hard for me to comprehend $40 hamburgers, it’s equally hard to imagine my parents going to the movies as children and only paying twenty-five cents!

2) It is more popular to inflate than to raise taxes. Inflation is a way for the federal government to tax your savings, because as prices rise, the dollars in your savings account buy less. Savvy investors with political influence know how to profit from inflation and simultaneously shift the tax burden onto the financially illiterate working class. Americans are indoctrinated into a compulsory system of government controlled education which teaches: get a good education, work hard at a job for 40 years, and save your money in banks, the social security retirement fund, and invest in Wall Street. This is another example of the fox watching the hen house. People are starting to realize this system doesn’t work, because inflation is consistently outpacing the profits generated by savings accounts and Wall Street investments.

3) Inflation is a tax upon foreign nations. The US dollar is the world’s reserve currency for oil. Every country in the world buys or sells oil denominated in US Dollars. Regardless of whether you are Japan, China or France, every country in the world must hold huge reserves of US Dollars to buy or sell oil. As the US prints more money, each dollar in circulation buys less stuff and is therefore the dollars they are holding are robbed of valued (inflation). Foreign governments don’t like this because this gives the US an unfair advantage. The US can print an infinite number of dollars with the click of a mouse to purchase valuable commodities such as oil from foreign nations. As long as the nations of the world are forced to conduct international oil commerce in US dollars, there will be a need for them to hold US dollars. It is hugely important to note that more US dollars are held by foreign nations than by Americans. The moment OPEC starts trading oil in a currency other than US Dollars, there would be sudden and catastrophic inflation in the United States as foreigners race to trade in their worthless paper money for commodities denominated in US currency such as US real estate, food, and precious metals. (Digression: I haven’t met anyone who can explain why the US military is in the Middle East, but making sure OPEC does not denominate oil in a currency other than US Dollars seems just as plausible a reason as anything else.)

Fortunately, profiting from inflation is relatively simple and I will be covering this topic extensively in my upcoming newsletters.

Best regards,

David Campbell
Real Estate Investor / Developer / Financial Mentor
Founder of Hassle-Free Cash Flow Investing
707-373-9966
David@hasslefreecashflowinvesting.com

One Response to How to Profit from QE2 (Quantitative Easing) – PART 1

Invest Where The Economy is Going | Hassle-free Cashflow Investing says:

03/14/2011 at 5:13 pm

[…] subject. I particularly recommend this series of three articles on how to profit from inflation: Inflation Article One, Inflation Article Two, Inflation Article Three. ACTION STEP 1: Acquire income producing real […]

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