CHAPTER 3

The Medicine Becomes Poison: Dangerous Inflation Ahead

Inflation is always and everywhere a monetary phenomenon.

—Milton Friedman, Nobel Prize–winning expert on monetary theory

In the last chapter we told you how and why the real estate, stock, private debt, and discretionary spending bubbles began to pop before and during the financial crisis of late 2008. In the next chapter, you will see how these first four bursting bubbles will help bring down the last two: our vulnerable dollar and massive government debt bubbles.

But first, wedged in between these bursting bubbles, we offer you an in-depth look into something that we feel you absolutely must know about right now. Something so pressing and dangerous that if you believe nothing else in our books, you must give serious consideration to what we are about to tell you. Why? Because unlike some of our other predictions, this future threat has actually already become inevitable. Like a submarine missile that has already been launched, it is silently hurtling towards us. We are just waiting for impact.

This already launched missile heading our way is inflation. Not too many people are currently worried about inflation because right now inflation is low and poses no immediate threat. But inflation is the most significant future danger to the dollar, and understanding where it comes from and what it will do is essential for understanding why and when the dollar and government debt bubbles will fully collapse, bringing down what remains of the stock, real estate, private debt, and discretionary spending bubbles. This new chapter on inflation is one of the key additions to this updated second edition of Aftershock and is the basis for many of the other important updates we’ve made throughout the book—incorporating a greater focus on both the current causes and future impacts of inflation.

A note to the easily bored: If the seemingly dry subject matter is tempting you to skip this chapter, please don’t. Please give us a few minutes to explain what inflation is, how it hurts, and what has already happened that will cause it in the future.

By the end of this chapter, you will be among the few people who know that this dangerous missile has already been launched and why it is so critical to the future of the economy. More importantly, you can begin to take steps now to brace yourself for impact, while most people have no clue that significant and dangerous inflation is ahead. In fact, our investment advice later in this book regarding asset protection and potential profits will make much more sense to you in light of this chapter. If nothing else, knowing that inflation is coming will save you from being entirely surprised when this already launched missile finally hits.