How to Mitigate Inflation Risk

I was listening to the beginning of the Dave Ramsey show and he started by talking about a couple that had sent him an email. 

Their situation (think of what you would tell them to do...):

$58,000 per year in income
$75,000 per year in expenses and lifestyle
$317,000 in credit card debt - costing $10,000 per year to service the debt

They proposed they were going to have to cut their expenses to $72,000 per year.

What would you tell them to do?

The gist of the story - it was not a couple, it was the US Government.  This is where we are today with the same ratios for these numbers.  Further:

1) If we stop spending money on everything except for defense, medicare, medicaid, and social security, the budget will still not balance.
2) If you take 100% of the money from 'the rich' (>250k per year) the budget will still not balance, and many small businesses will be shuttered, resulting in a large increase in unemployment.

Wow!  It's amazing, in a horrible way, to think of the problem we've created for ourselves.  Neither party is proposing what you or I would do: get expenses under control the same year, instead of 'reducing the deficit by half in four years.'  Remember: there were no tax cuts between 2010 and 2011 (only a continnuation of the same tax rates), so the increase in deficit is an increase in spending, not a 'tax cut'.

Prices of commodities are going to continue to rise as US inflation takes form and begins to make our collective lives harder.  The following commodities are going up astronomically already: Wheat, corn, coffee, oil (gasoline), basic metals (copper, steel, aluminum), fibers (cotton, wool, chemical additives for nylon) and others.

I want to be in those commodities for a while, or play 'near them' in the market, because we are going to have states go through considerable trouble.  The biggest problems right now are Illinois, New York and California.  Other states have deficits, but these are the ones that are teetering.  Forget raw numbers, it's about the percentage of debt versus income that make these states the worst.

It has been proposed we need a way for a state to declare bankruptcy.  Constitutional scholars have looked at long past history and come up with the following:

1) If a self governing state is not able to pay its own bills, it cannot be said to be 'self governing' any longer, which is a requirement for a state. 
2) A state's debts must be honored because they are in US Dollars, but bailing them out at the expense of neighboring states rewards the bad behavior of the state being bailed out.
3) Bankruptcy would allow a state to break all contracts and start anew, but won't address the fundamental underlying problem: the culture and people that created the mess is still in charge.

Therefore it is being proposed:
1) The state may declare bankruptcy
2) The US federal government, using taxpayer's money from all states, will bail out a bankrupt state
3) The state being bailed out will be reduced to being a 'territory' of the United States, thus losing federal voting representation.  This would likely last for at least ten years.

Today I read that something has scared the Fed and they're thinking about ending QE2 early.  This portends disaster.

I'm not trying to be political - My advice based on all of this: inflationproof your portfolio... as facts are stubborn things.

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