Investing Tip:

1970's Once in a Lifetime Event

1970's Once in a Lifetime Event

I mentioned recently in an investment tip about what caused the inflation of the 1970's and why I don't believe we'll see inflation like that again. There was an extraordinary event that took place in 1971. Do you know what it is? Hint: It has nothing to do with oil. Don't look yet, see if you can guess first. See the answer below.

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The answer is that the US went off the gold standard for the first time since the Civil War. And it was not just in the US. Most of the rest of the world stopped tying their currencies to gold. And the effect was like the snapping a spring. It took years of gyrating before things finally leveled out and pent-up inflation was tamed. I find it fascinating that few remember this took place during the Nixon administration. The world has now adjusted, so I don't think we'll again see that raging inflation in the Western World. But I also don't believe we'll see the deflation that many were recently afraid of, and I think that we're in for a bout of inflation here soon. It may have already started. A little inflation actually is a good thing. A lot and things get unhealthy (like in the 1970's). Watch the inflation numbers carefully over the next few months. If they are a little higher but not too high, that could actually be good news. But if they are too high...... Well, let's just think about pleasanter things.

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