"We are seeing history in the making. And what's happening in the Middle East is coinciding with some of the mega trends underlying our investment position," note long-standing resource experts Mary Anne and Pamela Aden.
The editors of The Aden Forecast explain, "Here, we review five trends -- related to inflation, interest rates, the U.S. dollar, bonds, and metals -- that should last for many years.
1. Inflation is starting to pick up.
"This trend is set to intensify and it'll be an important factor fueling the other big trends. How can we be so sure?
"Most people think of inflation as rising prices. And while it's true that rising prices push inflation higher, it's not the cause of inflation.
"The direct cause is excessive money creation. Too much money equals price inflation. And the fact is, far more money has been created over the past couple of years than at any other time in U.S. history. So the cause has already taken place. The effect is arriving.
"In the U.S., for instance, government spending has gone wild. All of this money creation comes at a high price, and that's inflation. This has happened over and over for thousands of years and it's happening again.
"Only this time the amounts involved are so huge and unprecedented, we can onlyimagine how big the eventual inflation will be.
"For now, food and oil prices are surging but this is likely still the early stages of much higher prices in the future. Meanwhile, events in the Middle East are only adding fuel to the fire, especially for the oil price.
2. The fundamentals for gold and silver point to much higher prices for years to come.
"Gold and silver are the ultimate safe havens in times of uncertainty. So increasingly, they are turning to gold and silver.
"Another huge positive, which has kept a strong foundation under the gold and silver markets is the growing, huge demand coming from the emerging countries.
"As hundreds of millions of people worldwide become more affluent, they're buying gold. Central banks have also been big buyers, further increasing demand.
"Here too, they see what's happening on the world monetary stage and they don't like it. So they're adding to their gold reserves rather than just holding cash.
"Gold is also the ultimate inflation hedge and it always has been. If the marketplace anticipates higher inflation investors will turn to gold as protection, driving the price even higher.
"This too is now happening and if inflation picks up as we anticipate, it will push prices higher than most people expect.
"In the 1970s during the last big inflation, for example, gold soared about 2,300% and silver 3,600%. We believe the current and upcoming inflation could be even more serious than it was then.
"Gold is still far from being in a bubble, despite its rise over the past 10 years. These metals have lots of upside potential and they'll very likely be the best investments in the years ahead.
3. The U.S. dollar has been dropping for 40 years, and all signs point to a continuation of this trend in the years to come.
"The dollar has decline ever since the U.S. went off the gold standard and the era of undisciplined deficit spending began.
"The dollar has plunged nearly 80% against the other major currencies since then, a trend we see continuing.
"That's especially true considering the massive spending and debt build up over the past few years, combined with unprecedented money creation.
"More dollars make the dollar worth less. That's why the dollar is falling and why it's going to drop much further. This will result in a loss of purchasing power for those who hold U.S. dollars. Higher inflation will only make matters worse.
"A weaker dollar also means that some of the stronger major currencies will keep rising. So it will become increasingly important to diversify your savings into a basket of the stronger currencies and out of dollars in the upcoming years.
4. Interest rates are poised to rise much further in the years ahead.
"Interest rates rise during times of inflation, even more so when the U.S. dollar is weak. That's because rising rates become necessary to attract investors into U.S. dollars.
"Even though the Fed says they're going to keep interest rates low to help the economy, they simply won't be able to.
"The Fed can control short-term interest rates, but not long-term rates. And with the U.S. needing more and more money to finance all of its expenses, the marketplace will demand higher rates in exchange for the growing risk.
"Under the current circumstances, interest rates are poised to rise much further in the years ahead. This will be good for those who need some income, but not for borrowers.
5. We're not at all optimistic about the future of bonds.
"Higher U.S. interest rates mean bond prices will fall and they'll likely fall sharply. In the 1970s, for instance, U.S. government bond prices plunged about 60%.
"The U.S. dollar also dropped around 60% and since bonds are denominated in dollars, it made the overall decline even more damaging. This will probably happen again.
"Inflation is the bond market's worst enemy. A declining dollar is yet another enemy. In fact, bonds may prove to be one of the worst investments over the next five years.
"In a nutshell, that's our brief summary for the years ahead. The way things are developing, we believe these trends still have years to run. And depending on what happens in the Middle East, these trends could intensify sooner rather than later."
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