Q: Will inflation be an ongoing problem?
A: We believe it will be an investment factor indefinitely.
Consider this. The U.S. now has over 33 trillion in federal debt and over a trillion dollars of annual interest payments.1 Those trillion-dollar interest payments can no longer be spent on education, power grids, roads, bridges, the elderly, the handicapped, or anything else of value – just debt payments – like a giant credit card – no principal pay-down, just interest.
Will the debt be paid off? Not in my opinion, and the debt payments will continue. The last 4 presidents (BOTB – Bush, Obama, Trump, and Biden) increased our national debt sevenfold.2 With nothing to show for it. The first 42 U.S. presidents ran up a national debt of $5 trillion over a 224-year span. BOTB added another $30 trillion in just 24 years.2 Where is this headed?
Is this strictly a U.S. problem? No. Governments around the world have now racked up over 300 trillion in debt.3 How can governments afford to make the ongoing “credit card” payments on those borrowed funds? Simple, by devaluing our money and thus making the payments cheaper. This is accomplished by printing “bogus bucks” or “funny money.” “Quantitative Easing” (simply printing more and more money – quantity – to cover– easing the trillions of overspending) was the term coined by Ben Bernanke (former Federal Reserve Chairman).4 Does your dollar still buy as much at the grocery store? No! The government will also make its interest payments with less valuable dollars. This is how inflation is deliberately created and why.
We suggest you invest accordingly. The stock market has generally been an asset class that has provided inflation-plus returns over the decades. Since 1960, the S&P 500 has averaged over 10% in annual returns while inflation has averaged 3.75%.5
2https://www.statista.com/statistics/187867/public-debt-of-the-united-states-since-1990/
3https://www.reuters.com/business/global-debt-hits-new-record-high-313-trillion
4https://www.investopedia.com/terms/b/benbernanke.asp
5https://www.in2013dollars.com/us/inflation/1960?amount=2545
For more information about Aileron Investment Advisors visit www.investwithaia.com.
Investing involves risk, including the potential loss of principal. This is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.
Securities and advisory services are offered through Madison Avenue Securities, LLC (“MAS”), a registered investment adviser & member FINRA/SIPC. MAS and Aileron Investment Advisors are not affiliated companies. 05/06
