Biggest Inflation Risk

by | May 11, 2022 | Archives

Knowing what inflation will do to the purchasing power of the dollar can help us understand how to survive during inflation.

In 1968 I left the US and started living, investing and doing business globally.  Here are some of the pages in my first passport.  (I have used up many more passports since!)


In May 1971 one of my most important experiences taught me a lesson about trusting a strong US dollar.

I will never forget this currency survival lesson when the dollar was unpegged from the Bretton Woods Agreement.   I recall it well. I was in Singapore in early May 5, 1971.

This was the beginning of the worst inflation all of us have seen in our lifetime.

The spark that started this, was the loss of the gold standard and a US stock market that was in a mess. The Dow had lost nearly 50% over a 20-month period, and for close to a decade few people wanted anything to do with stocks.

Economic growth was weak, which results in rising unemployment that eventually reached double-digits.

These conditions led to easy-money policies at the Fed, designed to generate full employment by the early 1970s.  This was the fuel that caused the high inflation.  The central bank would later reverse its policies, raising interest rates to some 20%.

For interest-sensitive industries, such as housing and cars, rising interest rates cause a calamity. With interest rates skyrocketing, many people are priced out of new cars and homes.

The spark, this time, has been different.  First the 2008 meltdown started easy money.  Then the pandemic followed.  The fuel, is the same as in the 1970s, easy-money policies at the Fed.

Little did I know that this week in the 1970s was one that would change the world… for the worse.

I was staying at the Raffles Hotel, a famous historic site.


At that time the hotel was colonially faded but offered a great outdoor restaurant just next to the Long Bar (home of the Singapore Sling).   They offered a traditional breakfast with old fashioned pots of thick cut marmalade and slightly burnt toast that stood in racks of sterling silver.  This elegant setting and the quiet service was an easy, wonderful way to start the day.  I felt in place, relaxed and comfortable, part of an ancient tradition, the modern link in a rite that this hotel had offered prosperity for so many generations past.  I sat back feeling that all was well.  I felt in control and on top of that modern era.

However, everything suddenly changed as I was about to learn a serious lesson in international currency safety.

I settled in for breakfast,opened the local paper (the Straits Times) and saw the four inch headlines that declared “U.S. Dollar Devalues”.

That comfortable era had just come to an end.  Currencies around the world were in turmoil and a time of currency chaos had begin and lasts to this day.

Yesterday’s message, “Don’t Trust the Flies” looked at chaos and shared some ideas on how to find underlying order in apparently random data.

We can glean insights on how to react to the US dollar and all currencies in the future from this excerpt which shows us that:

#1:  It is impossible to predict anything perfectly.  Start with the premise that you do not know what inflation of the US dollar will do.

#2: There are little windows of order within all chaos.  Understand that something will maintain purchasing power.

#3: There are numerous ways that our wealth can be stolen during inflation and one of the most dangerous is the cost of US health care.
That’s why I chose to make the first of my many books about natural health care.

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