“Expropriation by fraud”… That’s how our cofounder and legendary speculator Doug Casey describes inflation. Doug… If taxation is the expropriation of wealth by force, then inflation is its expropriation by fraud. It’s a reminder that inflation acts like a tax on wealth – the higher it goes, the poorer you get. This is particularly important to keep in mind today. June figures just out of the Bureau of Labor Statistics show that consumer prices jumped 5.4% over the past year. That’s their highest rise in 13 years. And despite what the Fed and the folks in Washington want you to believe, inflation isn’t ending soon. Ongoing government money-printing will see to that. So today, we return to the most important question for us as investors right now: How do we shield our wealth… and even profit as inflation sets in? As you’ll see, it all boils down to one rock-solid rule. Follow it, and you’ll survive… even thrive… as inflation sets in. Ignore it, and you’ll struggle just to stay even. | Recommended Link | | Once-in-20-years trading opportunity In the coming weeks, a market move that's occurred just twice in half a century could help you double your money 10 different times… without touching a single stock along the way. "It will be a trader's paradise," says former Silicon Valley $200 million money manager and legendary trader Jeff Clark. "The last time this happened, I made the biggest profit I'd ever seen on a single trade." So far, you could have doubled your money 14 different times in 2021 with Jeff's trading recommendations. On Thursday, July 22nd, at 8 p.m. ET, he'll explain exactly where to put your money right now… And give away a FREE trading recommendation. | | | -- | Even seemingly “low” inflation can cut your savings in half… A 5% annual inflation rate may not sound too bad. Five isn’t a big number. And it’s still nowhere near the 14% peak annual rate from 1980. But shockingly, it’s enough to cut your savings in half in 14 years. This chart shows what different inflation rates do to your savings if you simply stuff dollar bills under your mattress… At a 5% annual rate, inflation eats up half your wealth in just 14 years. The upshot is clear… Find an inflation-resistant home for your savings, or see your wealth disappear. That’s where our rock-solid rule comes in… When inflation is running hot, you want to own hard assets. That means assets that are hard to produce more of relative to existing supply. Gold, silver, and other metals… real estate… and even bitcoin fall into this category. (Bitcoin, remember, costs money to mine and has a hard cap on total supply.) Up 5X More Than Bitcoin… You want to own hard assets because governments can’t inflate away their values. That’s what’s happening to the U.S. dollar right now. Congress… aided and abetted by the Fed… is ballooning its supply. So each dollar buys less stuff. It’s all in the next chart of M2, a broad measure of the money supply the Fed uses. As you can see, M2 is up 32% since the start of 2020. That’s a roughly one-third increase in the number of dollars in circulation. Here’s Doug with more on the role of money-printing in fueling inflation… Inflation occurs when the creation of currency outruns the creation of real wealth it can bid for… It isn’t caused by price increases; rather, it causes price increases. Inflation is not caused by the butcher, the baker, or the automaker, although they usually get blamed. On the contrary, by producing real wealth, they fight the effects of inflation. Inflation is the work of government alone, since government alone controls the creation of currency. That’s what makes investing in farmland so interesting right now… This is an idea you won’t hear much about on CNBC… or in the mainstream financial press. But farmland is scarce… and getting scarcer. That makes it a great way to combat inflation. It’s all in this next chart of arable land worldwide going back to 1960. As you can see, the amount of arable land has roughly halved over that time when you compare it with the size of the world’s population. I talked with our commodities investing expert, Dave Forest, about this for a recent issue of our Legacy Inner Circle advisory. (Paid-up members can catch up here.) Dave has been giving his readers the chance to make gains of 326%… 367%… and even 484% on gold mining stocks. And he reckons farmland is the perfect inflation hedge because it’s disappearing… Farming is a dwindling occupation. Urbanization is a massive trend around the world. Everybody is moving from the countryside into cities. And once people leave and abandon those fields, a lot of them are lost, as far as farming capability goes. We’re seeing a big decline in the amount of available farming land. That just makes it more valuable. That trend’s going to continue. People are leaving the countryside. Urbanization is not stopping. Meanwhile, the United Nations expects there to be about 10 billion people on Earth by 2050. That’s up from about 8 billion today. That means we’ll need 1 billion more pounds of grain – about 50% more than we grow today – to meet that new demand. | Recommended Link | Bill Gates and Fellow Billionaires "All In" on This Small-Cap It's no wonder Citron Research says this small-cap is "backed by the world's most sophisticated investors." Bill Gates invested over $300 million into this small-cap stock. His fellow billionaires like David E. Shaw and Ron Baron bought over 9 million shares combined. Elite funds like BlackRock and Vanguard are in too. Fortunately, tech expert Jeff Brown says there is still time to get in — before this stock explodes. | | | -- | You don’t need to own a farm to profit… Instead, Dave recommends buying shares in farmland real estate investment trusts, or REITs. REITs trade on public stock exchanges like regular stocks. But their business is owning and operating income-producing real estate. With a farmland REIT, anyone with a brokerage account can get exposure to farmland in their portfolio. You can buy and sell REITS anytime you want. And they offer more diversification than a single farm. For example, the first and largest farmland REIT is Gladstone Land Corporation (LAND). It owns 141 farms, spanning 104,000 total acres across 13 U.S. states. Its land is valued at over $1.2 billion and is 100% leased. Right now, LAND pays a dividend yield of 2.2%. And its share price is already up 61% this year. But if inflation keeps ticking up, there’s plenty more room for this and other farmland REITs to run higher. In the mailbag: “Eventually, the dollar will collapse”… Doug and Dave aren’t the only ones here at Legacy Research who have been warning about inflation. Our other cofounder, Bill Bonner, has been sounding the alarm too. In last Friday’s edition of his free Diary e-letter, he spelled out what happens… The trouble with trouble is that it starts as fun. And the fun continues… for a while. People are happy to get the new money. Alas, each new note competes with existing notes for the same goods and services. That’s the problem with inflation – it increases demand without increasing supply. Prices rise. The money – old and new – falls. It’s a theme at the top of Bill’s readers’ minds as well… Inflation is not the chief issue with respect to monetary instability. Eventually, the dollar will collapse… whether because of loss of credibility, social unrest, rejection by global central bankers, or inflation. Even if the U.S. doesn’t reach the point of collapse, a preemptive demonetization could leave the average American even worse off than the stagnant past 50 years have. – Mitchell L. All this “funny money” has resulted in an escalation of the transfer of wealth from the poor and middle class to the rich. That’s the underlying, long-simmering reason for the Marxist revolution taking place in America. Wealth inequality is what has driven all Marxist revolutions. And they’ve all been disastrous. – Jerry R. Milton Friedman called inflation “taxation without legislation.” Central banks have announced plans to fight the risks related to climate change. Perhaps if they stopped diluting the value of money and subsidizing (over)consumption with negative real interest rates, it would give Mother Earth a breather. Just a thought. Long live Bill’s Diary! – Sébastien P. Do you share Bill’s fears for the future of the dollar? If so, how are you shielding yourself against inflation? Send your thoughts to feedback@legacyresearch.com. Regards, Chris Lowe
July 19, 2021
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