THE THREAT OF INFLATION 55are surprised to hear that, but it’s true. Conversely, almost
everybody who’s working pays the payroll tax. By cutting the
payroll tax, the government is able to put money right in peo-
ple’s pockets because it affects everyone.
That tax cut increases the federal deficit. The Fed, how-
ever, says to the Treasury, “Hey, guys. Don’t worry about it.
We’ve got your back. Go borrow the money to fill the hole in
the deficit and we’ll print the money.”
That’s the kind of money printing where you don’t rely on
the banks to make loans. You put the money right in people’s
pockets with a tax cut. You deficit finance the tax cut and you
print money to pay the deficit. That’s helicopter money.
While we’re seeing peer-to-peer lending and social media
today, we might see helicopter money in 2016.
Remember, it’s an election year and politicians love tax cuts.
This game is not over because at the end of the day, the govern-
ment has to get inflation. They’re not getting it. They’ve been
trying to get inflation for five years and haven’t succeeded.
At present, deflation is a greater danger. What I try to ex-
plain to investors is, you shouldn’t think of one or the other.
Don’t think we’re definitely going to have inflation or we’re
definitely going to have deflation. Think of it as a tug of war
where two forces are pulling against each other and, at any
point, one side is winning.
At writing, deflation is winning. But sooner than later, infla-
tion might start to win. And what I try to do in Strategic Intelligence
is help you understand that dynamic, keep you informed and give
you portfolio suggestions so you can win either way.
■ How High Could inflation Get?
In the last fifty years, inflation in the U.S. went as high as thir-
teen percent. But let’s say it didn’t get that high. Instead, let’s
say it got to nine percent.