Economics - US Heading into Hyperinflation?
July 29, 2013 Fed Funds Rate have stayed low from the last quarter of 2008, more than 4 and 1/2 years. Low interest rate would trigger inflation however in the last 5 years average inflation rate is 1.63%. It does not mean that inflation would stay low in the coming years. Some analyst argue that US would enter into deflation but the contrary would be true. Once the Fed Funds Rate moves up, US will experience hyperinflation.
We have had inflation in the past but it mostly towards gold and silver because investment demand. Now the post effect will spread into all other areas including gas and food prices. There is no surprise if McDonalds replaces the dollar menu with 2 dollars menus.
Once Fed starts QE Tapering and increasing interest rate, people will think there might be deflation entering into US economy. But Fed will increase the rate only when the inflation is moving up. When Fed increases the interest rate, there will be panic on inflation would rise and eventually it will trigger hyperinflation.
If you want to protect your assets, US dollar is very good but only for the short term, may be 3-6 months. Then bearsih sentiment on dollar will increase which in turn increase the price of gold and silver to test its all time high.
If you closely watch the market, then you can identify the best time to buy gold which would be when the US$ is very strong. Move your money from US currency into commodties gradually.
When there is a hyperinflation, it would strongly support home prices and eventhough interest rates rise, it would not push down the home price, however it will limit the accelerated growth on home prices. Slowly the inflation and home price increase will move towards convergence.