Not convinced? Import prices rose 1.6 percent last month. You will be seeing the effects of jumps like this soon. It takes a while for price increases to show up in retail.

The biggest problem on the horizon is clear. You ever take Econ 101 in college? They have that section on guns and butter. Anybody remember that section? Well bottom-line, the book says governments cannot have guns and butter without causing inflation and slow downs in the economy. Well we have guns--Iraq. And we have butter--tax cuts. You can decide for yourself, but this strategy has never worked in the past. Remember Viet Nam. I don't mean the war; I mean the cost of fighting a war and not taxing to fight the war. That is what lead to the late 70's explosion in prices. Of course, there were other bad decisions that helped add fuel to the fire.

Right now, most investors are thinking the FED might raise short term rates 25-50 basis points. What happens if its 50-100, 100-200? Short term rates are going up, and they are going up dramatically in the years ahead. If anything, the historians will look back at this point in history and shake their heads. Too young to remember when the fed funds rate was 20 percent?

Think rates cannot go up much? Like I said, I have been around a while. The mortgage rate on the first property I ever purchased? 14.75%. And, I had excellent credit and no debt.

Next time around we'll talk about the next Internet bubble--housing! And along the way we will talk about ways to benefit from rising inflation.

All American Investor

I am also the editor of the Watch Right Internet Crimes Against Children Weblog

About the Author

Feel free to email me direct at rtdemarco@aol.com . If you are wondering what P*S*D stands for email me with PSD in the subject box.