Some estimate the cost of hurricane Katrina will probably end up at $200 billion dollars. Next week, we will most likely be hearing of estimates of the cost of hurricane Rita.
Added to these, we have the cost of a creative plan by Congressman Rep. Gene Taylor (r) of Mississippi who is working to rewrite the rules of the national flood insurance program to let homeowners who weren't required to buy it to purchase retroactive flood insurance coverage.
There it is folks. One more example of how some in our society believe individuals shouldn't be held accountable for their decisions. And not only that, these people apparently have no problem giving your tax dollars to these individuals. Imagine the outrage of those responsible types who purchased federal flood insurance year after year forgoing things that could otherwise have been purchased to enrich their lives. The final slap in their face will come when they realize their tax dollars will be given to the uninsured home owners too.
It's interesting to note that these dollars aren't sitting in the government's bank account waiting to be spent. They haven't even been created yet rather they will be printed by the government to pay the costs of these two natural disasters. Hundreds of billions of dollars flooding into the economy just like the hurricane waters flooded into New Orleans.
What impact is this going to have on the dollars I have in my pocket? You might ask. Well, for one thing, your dollars are being inflated. That is to say, they are losing their purchasing power and this will be evidenced in the rising cost of goods and services.
The two hurricanes are going to have another effect on our economy by contributing to inflation in another way. With the oil, gasoline, and natural gas supply suffering from the storms, the price of each of these commodities is going to go up.
In the late '70s, early '80s, during the oil embargo, gas and oil were scarce and their respective prices went up. Yet I would like for someone to explain to me how this causes inflation.
Personally, I don't believe rising prices cause inflation yet inflation was a problem then and it could very well be a problem again as a result of these storms. I suspect inflation occurs because when prices go up, the government injects more money into the economy to compensate for the higher prices. Then, after they realize they have pumped too many dollars into the system, they start to raise interest rates to slow the flow of dollars into the economy.
Whether I am correct in my thinking or not, there appears to be a consensus forming that believes inflation is on the way and they are about the business of protecting themselves. While we, as individuals, can't stop the federal government from printing dollars and diminishing our wealth, we can, at least, exercise the same defensive tactics as those who are anticipating inflation by purchasing gold.
Yes, I have been the "voice crying in the wilderness" advocating that people should have at least 10% of their portfolios in gold bullion. And since the price of gold is at a 17 year high, it appears to have been good advice. When Viewpoint first went online, gold was about $350 per ounce. This week it hit $470 (and pulled back to $463).
The fact of the matter is that ultimately, gold is the only real money. Always was and probably always will be. Despite what governments will imply (because they want you to buy into the concept of an ever inflating fiat currency) gold is a way to protect your wealth from the devastating effects of inflation. See what Alan Greenspan had to say at this link that I've posted numerous times before.
And for some entertaining reading, check out this link to see what the Mogambo Guru has to say about inflation. This guy is a hoot and I think he's worth listening to.
