Let's start with a definition: Inflation is an increase in the broad rise in the price of a basket of goods and services that is representative of the economy as a whole.

One of our jobs is to prepare our Dolan family for what lies ahead before it happens...not after!

So today, we want to talk about a new danger ahead that you must prepare for: inflation.

Is inflation likely to grab us in the short term...NO, because of our current weak economy.  Recessions keep inflation low and slight increases in productivity (like we've seen) are also an anti-inflationary force.

We believe that inflation will stay fairly steady at current levels for the next few months.

BUT, with the Fed's aggressive policy measures, inflation is likely on the horizon.

How can we possibly pay for all the programs being suggested without the Fed printing out new batches of greenbacks?

Plus, we have a weak dollar which makes imports much more expensive. That's more inflation fuel.
The most recent period in which the US experienced a major inflation outbreak was the mid-70s to the early 80s. We experienced a surge in the value of gold, an inflation rate in excess of 13%, resulting in a surge in oil prices and a prime rate over 21%.

Although the situation is not exactly the same...check out today's similarities. Gold reaching near its all-time high of $1033 per ounce, higher oil prices, an expansive monetary policy by the Fed and unbelievably massive deficit spending by the empty suits in Washington.

It is always risky making longer-term economic predictions (short-term predictions these days are tough enough!)...but we believe that the prospect for inflation remains very realistic and that we  should start planning now for that eventuality.

We know that Federal Reserve Chairman Bernanke insists that a return to inflation is not on the horizon.

But this is the same guy who continued to oversee a housing bubble until it burst.

Controlling inflation is, or should be, one of the Federal Reserve's primary goals, but, it doesn't seem to be at the moment.

Currency fund manager Axel Merk of Merk Investments said that the U.S. central bank is promoting a "fairy tale" that it could keep inflation in check while sticking to its current rate target of between 0% and .25%...which, effectively increases the money supply. We agree.

Be sure to factor a 4% inflation rate into your retirement planning.

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