Inflation is the intentional result of the Federal Reserve system.  By baking in what they hope is controllable inflation (men plan and God laughs) they, meaning the government, can make the huge debt seem like less, as the money loses value.  The problem is that this loss of value, even at a low level like 3% per year (which has been about the average) distorts all of our decision making.  What I mean is this - ask yourself, if you were certain that a dollar was not going to lose value over time, would you take risks with your money, many of which you don't understand?

What do I mean by not understand?  Well, do you really know everything about every stock in that mutual fund you own?  When you buy individual stocks, do you really understand what the company does and can you read a balance sheet and discern what it means?  When you listen to the stock market experts do you really understand all that jargon?  When you buy real estate do you really understand all the cost factors, community absorption rates, and all other factors in deciding what a fair price is or do you just trust a realtor to give you a ballpark number?

The point is, that almost no one REALLY understands what it is that they are investing in and only do it at all because if they don't, even 3% inflation (not to mention taxes on top of that) mean that they are losing money even if they are not spending it.  So, we all have to take uninformed risk to offset that inflation and tax risk built into the system and when poorly informed people start buying and selling things they don't really understand, that is how bubbles form and bust. And the more regulation that the government adds supposedly to protect us, and the more taxes they levy supposedly to provide vital service, and the more they print to prop up the stock and bond markets, the more risk we all have to take to offset the damage and the more bubbles will form and the more boom and busts will ensue.  See?  The government is the root of all this disaster and we keep voting the bums in!  Amazing!

This week the Dow hit 11,000 and the hallelujahs were all over Wall Street.  Never mind that it was at 14,000 - ten years ago!  And never mind that in real dollars 11,000 today spends like 7,000 ten years ago.  We are all supposed to be overjoyed and run right out and spend those "profits" to keep the economy rolling.  But on Main Street, finally, a lot of folks are no longer fooled.  They are going to keep their money safe and hedged and not fall for this giant government run scheme to steal our wealth.  I just hope that you are among those that count themselves informed.