Inflation & Recession Proofing Your Income: Primary Objective?

The news for the past year or two has consistently reported doom and gloom about the Global Financial Crisis. Many people are a little bored about it – they hear nothing else

If you were fired more than a year ago, and are still unemployed, you would have a keen interest in the news, looking for some good news for a change. You can imagine the fears and frustrations of those in this dreadful situation.

The good news is that many long-term unemployed are still maintaining a brave face, and often find it possible to laugh at adversity.

I have friends in this situation with whom I discuss home business opportunities. Most remain convinced that the continuing growth in China will restore normal commercial operation soon. It is an almost classic case of denial.

I have 2 questions: What is the “Balance”? And if the Chinese can, why would they help everyone out?

Here is the thing: No-one really has a handle on “Balance.” Because the Chinese are starting to feel the inflationary pressures of their rampant growth, they may be able or willing to help everyone else out.

But the bad news is that most countries are continuing to borrow to support their economies. The borrowings have largely been passed on to lenders, whose role is to finance business, bankroll loans and provide cash for discretionary purchases that society desires. And China is the main lender for all this.

The banks know the real situation, and make a lot of noise about lending, but sit on the money, because they know the reality – they are deferring losses, and they have to hoard cash for the shake-out…

It doesn’t take a genius to work out that if you lend money to people when you have more than enough of your own cash shortages, you are asking for trouble. And that selling property at a loss, is not going to fix the problem. Nor is holding highly volatile shares, and hoping they will increase enough to cover shortfalls in margin requirements.

So, there is much more pain to come, unless there is a miracle, and the truly rich stop sitting on their hands, and start lifting the awful burden that Audie and Co. carry.

What we need to do is fund education and training for those who have not been able to find employment, assisting those who through lack of knowledge or opportunity are unable to assist themselves.

This training should be for jobs where there is a future, for public works and infrastructure projects, and for public housing where it’s needed

According to Alan Greenspan in his comments to the Wall Street Journal, credit risk for the US is not a problem as the US Government can print more money at will. But he repeated that a real risk is Interest rate increases.

Currently US interest rates are close to zero. However, I remember that in the late 70′s over a 4 month period, the rates increased by 1% per month. In early 1980, the banking prime rate for lending was 15.6%.

Debt as a measure of the GDP in creased over the 2 years between June 2008 to June 2010 by 21% to 59%. Without trying to frighten people unduly, this increase cannot be sustained unless interest rates increase substantially. This is a fact.

Inflation will arrive soon. It will be brutal. The goal for everyone should be to protect themselves from inflationary pressure on income and expenses. We all need to Recession proof our lives.

If this makes sense to you, check out Don Paul Fuller’s Blog, or go to his primary website. You will find helpful hints and suggestions for business. This article, Inflation & Recession Proofing Your Income: Primary Objective? has free reprint rights.