Money and Markets: Governments Can Try to Stop Inflation but They Will Prove Unsuccessful

Larry Edelson takes a closer look at the forces driving multiple economies into inflation. In this issue of Money and Markets, Mr. Edelson discusses how government interaction can create further inflation.

Jupiter, FL (PRWEB) October 29, 2007 -- In the newest issue of Money and Markets, Larry Edelson takes a closer look at the forces driving multiple economies into inflation. Mr. Edelson discusses how government interaction can create further inflation.

Countries like China, Thailand, and Malaysia are attempting to freeze prices from rising further. But the problem with trying to freeze prices is that it can backfire, and create more inflation.

Meanwhile, other countries say that inflation can never get out of control today. They argue that wages aren't rising like they did in the past. Plus, they say central bankers will stamp out inflation by raising interest rates quickly.

This is false because wage inflation is a consequence of inflation, not the cause of it. People demand higher wages when the cost of living rises. Wage inflation can create a vicious cycle of rising prices though.

Average hourly earnings recently jumped a hefty 0.4%, the most since April 2006. A component of wage inflation is productivity. If productivity is slowing, even if wages are constant, costs go up for the consumer.

And in the past 12 months, productivity has risen just 0.6% way down from the 3.6% rate seen during the technology boom. Bottom line: Wage inflation is coming, and it will add even more upside pressure to inflation.

There's simply too much debt in the world in both the private and public sectors. For many years now, all the people in power have been telling their citizens that inflation is not a problem - that it's running at 2%, 3%, or some other made-up figure. These tactics will work for a while. But eventually, people might begin to get suspicious.

And there are rumblings:

• Protests on gas prices have erupted in at least nine countries.

• Angry mobs from Mexico to Ho Chi Min City have convened upon government offices protesting food prices.

• In Mumbai and New Delhi, no less than five mob gatherings in the past two weeks have seen tens of thousands protesting everything from energy prices to the price of locally grown rice.

The following steps can protect money from the ravages of a falling dollar and rising inflation:

Step #1. Make sure to have core gold holdings in order.

Step #2. Get out of long-term government and corporate bonds immediately. Traders will sell these investments whenever they smell inflation.

Step #3. To hedge directly against the declining dollar, the Falling U.S. Dollar Profund (FDPIX) mutual fund can be purchased. When the dollar is sinking, this fund rises in value.

"And finally, don't ignore other key natural resource stocks. Since almost all of these investments are traded in dollar terms, they press higher whenever the greenback falls," Mr. Edelson advises.

To read this issue online, please visit:

http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=1130

About LARRY EDELSON & MONEY AND MARKETS

Larry Edelson With nearly three decades of experience in precious metals and natural resources markets, Larry Edelson has played a pivotal role in training Weiss Research staff and in guiding Weiss Research's customers to prudent investments in the sector.

His Real Wealth Report, Gold Trader Hotline and Energy Options Alert provide a continuing education on natural resource investments, with recommendations aiming for both profit and risk management. His team of technical analysts helps enhance the timing of investment recommendations with the aim of continually improving the performance results for investors.

Mr. Edelson is also an accomplished analyst and writer, making substantial contributions to Weiss Research's Safe Money Report and Money and Markets.

He holds a B.A. Degree from Columbia University and has three children.

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.

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