Inflation robs more Americans of their money than all of the crooks combined. The government bailouts currently being employed have huge consequences for Middle America.

::::::::

Good Morning Middle America, your King of Simple News is on the air.

U.S. NEWS: I like to start the day with a joke and some good news; today I can do both at once. A new report by some deranged economists says a recession in the U.S. is unlikely. Now that’s funny!

Here’s another one liner, “Congress is grilling the financial sector over fiscal improprieties.” I’ll give them this; Congress certainly has the experience to conduct such an investigation.

Funny stuff, but I promised to talk more about inflation today and that’s not so funny.

I know I’m boring those of you who have read my book, but a recap is always good. Inflation is a necessary part of the government scheme to mask the true economic status of the U.S.

What exactly does inflation do? It raises prices of everything, due to making the dollar worth less. So exactly how does that benefit government? Let me count the ways.

First, if all goods and services rise in price, and GDP (Gross Domestic Product) is measured by an increase in the total cost of goods and services; GDP could appear to be rising while productivity and real wealth accumulation was going down. This is often called the smoke and mirrors approach.

Second, inflation is normally artificially induced by lowering interest rates and flooding the market with new currency, which in turn increases borrowing and spending, but creates no savings and no real wealth accumulation. In other words, it appears things are getting better when in actuality the long term situation will get much worse.

Third, lower interest rates also benefit government when applied to the cost of paying interest on the National Debt. A low interest rate on more money gives the false appearance of stability. This is particularly true when the interest is subject to change as the financial instruments backing the funded National Debt mature. Ask the sub-prime crowd about this overlooked phenomenon.

Fourth, inflation artificially increases the value of assets. The number one asset that our government has is you. Inflation creates upward pressure on value and wages. Taxes are levied against value and wages. The higher the value, the higher the wages, the higher the taxes. Huh, who would’a thunk it.

As inflated values climb, the appearance is that the GDP is rising and the national debt (as measured against the newly inflated national wealth), is going down! This enables government to create more debt without changing the asset to debt ratio. There’s no jail term for this crime due to diplomatic immunity.

So what to do now? The FED is absolutely destroying our currency. If you have dollars invested in such instruments as certificates of deposit, savings accounts, or low fixed interest income on any dollar based investment vehicle, you’re losing money. That lose is picking up steam like a runaway train as inflation robs your wealth as sure as John Dillinger robbed banks.

If you have a cash stash that is not drawing interest, that stash is racing toward becoming worthless. To give that statement some meaning, my friend and I made a one day trip yesterday and burned $135.00 worth of diesel fuel. How much fuel would your cash have bought when you stashed it? How much will it buy next month?

Cash is trash and that is all there is to it. Here is a simple equation. If you have money drawing 4% interest and real (not reported) inflation is 7% (which is a conservative estimate), your perceived gain is an actual lose of 3%. It gets worse. That lose is reported as a 4% gain on your taxes and you pay income tax on your loses! I told you government was winning and you were losing. Your actual realized lose is somewhere in the neighborhood of 4%, exactly what it appeared that you were gaining.

So given the above, cash is not a good thing to be holding. Yes, some cash is absolutely necessary and we will talk about that tomorrow, but as an investment; nada.

Turn cash into real value. We established that cash loses money and we don’t need to establish that making interest payments loses money, so moving cash to paying debt at this point makes all the sense in the world.

Say you are paying 15% interest on a credit card debt and pay that debt off or down and then add back the lose being incurred from conventional savings, your effective return would be 19%. More tomorrow.

Wake Up Middle America, the rules are changing in the middle of the game.

Authors Website: www.kingofsimple.com

Authors Bio:
Mike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics.

The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, restaurateur, U.S. Navy veteran, heavy equipment operator, taxi cab driver, fishing guide, horse packer and few jobs too embarrassing to mention, writes from experience and plain common sense.

Mike’s humorous systems of “Mikeronomics” and “Mikemathics” drastically simplify the economic and mathematic formulas commonly used by very smart, but terribly sheltered individuals.