MasterPo says: This blog is about topics and issues that are of importance to me. I am not one of the countless blogging lemmings that are tripping over each other scurrying down the hill and off the cliff of blogging oblivion trying to write the greatest blog on the latest topic de'jour. Your comments are welcome.

February 25, 2011

It’s Preparation, Not Prevention

In 2010 a group calling itself the National Inflation Association published a report forecasting hyperinflation in 2011, especially soaring food prices. While MasterPo doesn’t agree with the specific projects this report claims (and has some significant disagreements with some stances that group takes in general), some measure of inflation is inevitable if not already showing itself in the supermarket. Even if food inflation is only one-quarter what the NIA is projecting we’re all in deep trouble!

The other day MasterPo was discussing this projection with an associate. As we pontificated over the possible resulting scenarios for paying $10 for a loaf of bread or $20 for a gallon of milk etc. the associate said “If it happens there’s nothing we can do to stop it so why worry about?”

“Why worry about?”

To MasterPo that sums up a lot of people’s attitudes about everything.

MasterPo agrees that some things (many things actually) are beyond the control of the individual to effect change.

You can’t control the weather.
You can’t control other people’s bad driving habits.
You can’t control delays at the airport.

But just because you can’t control the outcome does not mean there isn’t anything you can do to prepare for it.

Just throwing your hands up that you can’t prevent something isn’t a good response. It isn’t even a mature on. It’s the response of a person who doesn’t want to confront reality. Understandable to and extent. Unfortunately too many people these days seem to rather be dumb&happy in ignorance than deal with reality. A catastrophe unto itself.

It may rain so bring an umbrella.Other people drive badly so you drive defensively and have good insurance.Get to the airport well ahead of your flight time in case of delays. Etc.

In the case of inflation or hyperinflation there’s little the average-Joe can do to prevent it. Indeed it seems our government is Hell-bent on forcing massive inflation (if anything thinks the Fed can peg-hole inflation at ‘only’ 2-2.5% then come to New York for a bridge sale). Other than voting and writing your elected representatives there’s nothing the common man/woman can do to stop it.
But we can prepare for it.

You can buy investments that typically do well during inflation – Gold, silver, TIPS (though MasterPo’s opinion on TIPS is well known), blue chip stocks to name a few.

You can pay down debt now to free up cash flow for the future (not a bad idea in any event).

You can identify what costs in your life are truly necessities and which you can live without (you’ll probably find there are few necessities really, though MasterPo has no issue with “wanting” vs. “needing”, but that’s a topic for another time).

And so on.

There are many articles and opinions as to what can be done to prepare for an inflationary economic environment. A simple Google search will find dozens of sources.

The point is that while we can’t prevent inflation we can and should prepare now for inflation.

Imagine you’re on the Titanic and you know in 1 hour it’s going to hit an iceberg. No one in the crew will listen to you and you can’t change the ship’s course yourself. The ship’s fate is sealed. But you can prepare for it and increase your own chances of survival. You can go back to your cabin and collect only the most valuable items you must have. Dress very warmly. Then put on your life vest and wait by the closest life boat to ensure your first place on the line. You probably will be laughed at during the hour leading up to the hit. Probably laughed at more initially after the hit as no one will believe the ship is going to sink. But as reality sets in (and those around you start to panic) you will already be in a position to maximize your chances of survival.

Be that person.

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