Unless you are extremely wealthy or have an incredible retirement program, you’d better save for retirement. Even if you think you have a good retirement program, you need to take into account the rapid rise of inflation and the ongoing destruction of the dollar. The dollars in your pocket and in your retirement fund are losing money every day. A million dollars ain’t what it used to be.
When my father retired some 35 years ago, he had a pension from the Marine Corps and from the Teamsters. He also had Social Security. I don’t know if my father saved for his retirement. I imagine he did not. Nevertheless, his three sources of income were quite sufficient for him and my mother to live on. Part of the reason for this is that the house was paid for.
Times have changed. Social security is generally not enough to live on. Unless you have a very large retirement from your work, it might not be enough to live on. The two together might not be enough to live on. If you began saving when you were young and contributed to your savings regularly for 40 or 50 years, you should end up with a nice nest egg.
If you have such a nest egg and it is still in some kind of savings vehicle, a savings account, CD, or Money Market account, you are undoubtedly losing money in those accounts. It does pay to save and if you have been saving for a long time, you will have a good amount of money put aside. But to keep it in those savings vehicles right now may be a bad idea.
There are two problems already mentioned that I would like to speak about in more detail. One is the rate of inflation. In order to make money on any savings vehicle, your rate of return must be at least higher than the rate of inflation. If the numbers being given out by the government are accurate or meaningful, you might make enough interest on a simple savings account to just keep your earnings above water.
The problem is that those government numbers are not accurate and do not reflect the inflation we experience whenever we buy groceries or put gas in the car. As shocking as it may seem, food and energy are not included in the core prices that are used to determine inflation. In other words, the government leaves out the two areas where prices are going up most rapidly to come up with their inflation numbers.
When housing prices were going up like a rocket, housing costs were also not being counted in inflation calculations. Instead, they counted rental costs. Now that the cost of housing is receding, they may count it again. But this also served to understate inflation.
Another problem, also related to inflation, is that the Federal Reserve’s Ben Bernanke is dropping the prime lending rate like a fire sale at Wal-Mart. This is supposed to stop a recession. It’s quite amazing that he is doing the same thing that his predecessor, Alan Greenspan did, which created the housing bubble and the certainty of a recession in the present. Dropping the prime interest rate will undoubtedly just make a bad situation worse.
So with the interest rate being artificially dropped, there is no chance that any savings vehicle will return you more than you are losing through inflation. And if you knew the true inflation rate, you would be shocked at just how much money you are losing.
There is a site called Shadow Government Statistics (www.shadowstats.com) run by John Williams. Essentially, this site uses actual government numbers to determine the truth about inflation, job growth and loss, money supply, and other vital economic information that is being falsified by our government. While the site charges a lot for a subscription, archives that are only about a week old can be read by anyone. Unless you are an economist, they may not be of interest to you or may not even make any sense.
Here’s what I can tell you. Instead of inflation being 3% or less, as reported by the government, it is closer to 12%. Will your savings account, CD, or Money Market account bring you more than 12%? There’s another way to look at government lies regarding inflation. If inflation were being calculated today the same way it was calculated when Jimmy Carter was president, Social Security recipients would be getting 70% more money.
The government stopped reporting the M3 money supply. This tells us how much money the Fed is pouring into the economy. Essentially, the money supply represents debt, money borrowed through the sale of treasury bills. It is through the sale of these T-bills that China, Japan, and other nations are buying up America’s debt and are in a position to destroy the US economically at a whim.
Also, inflation does not have to do with rising prices. Rising prices are the result of an increase in the supply of money, the very thing that the government is no longer reporting. So inflation is due to an increase in the money supply, which happens to also cause the price of things to go up. So when Bernanke says that he will drop money from helicopters in order to stop a recession, he is causing more inflation, which will undoubtedly lead to an even greater recession or even depression.
Are you depressed yet? Wait, there’s more! The second problem, in addition to inflation but related to it, is the decreasing value of the dollar. The government continues to assure us that they are doing everything they can to support the dollar. This must be the same government that tells us that inflation is under control.
The fact is that the same thing that causes inflation, increasing the money supply, also decreases the value of the dollar. The dollar has been going down rapidly in recent weeks. This is best seen in the increase in the value of foreign currencies in relation to the dollar. Almost all currencies have increased in value relative to the dollar. The other place this shows up is in the increase in the value of precious metals such as gold and silver. They have gone ballistic just in the past two weeks, with silver threatening $20 an ounce and gold heading for $1,000 per ounce.
Greenspan betrayed the responsible people in this country who were saving money by dropping the prime rate to 1% Now Bernanke is doing the same thing and with the same inevitable and disastrous results. If you do nothing, you will lose money. If you leave your money in savings vehicles, whose interest continues to drop, you are losing money.
The only way to make money, given this betrayal of working people, is to invest in higher risk vehicles, like the stock market, mutual funds, or other high-risk potentially high return vehicles. You risk losing money this way as well so you are really between a rock and a hard place.
I can’t go into the solution in detail right now but there is a solution if you have the nerve. As the dollar drops and as interest rates drop, foreign currencies as well as commodities, including precious metals, are going to go up. Foreign stocks, carefully selected, will also potentially give better returns. The smart money is getting out of the dollar and out of US stocks.
It’s time to tighten your belt and cut way back on spending. If you choose to save with any traditional savings vehicle, that’s perfectly fine. Just be sure that you are saving as much as you can and understand that your savings will not be bringing you any gain. Still, it’s better to save than not to save.