In his famous novel “A Tale of Two Cities,” Charles Dickens wrote: “It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way.”

The context of Dickens novel is the years leading up to the French Revolution, and the struggle of people against the entrenched power structure of the government.  In a strange twist of irony, it seems to be descriptive of our current social and political climate where despair and opportunity are swirling beside one another.  This is creating a tale of two futures for the US economy, which will have repercussions throughout the globe.

The government has become a monstrous spending machine that depends on the purchase of votes with public funds and entitlement spending for the political class to retain its position.  This is inevitably going to result in an economic catastrophe when the entitlement liability becomes so large that it cannot be financed with taxation or borrowing and the government must resort to monetary expansion to satisfy its obligations.  Rapidly increasing the amount of money in circulation without a corresponding increase in productive output must necessarily result in price inflation.

The unfortunate outcome of this situation will be a tale of two futures for the people and the economy.  The rapid escalation in prices will erode the standard of living for people in the middle class who depend on income from their jobs, as prices for food energy and housing all rise faster than their income.  For the people who are ‘on the edge’ of financial ruin, this phenomenon may push them off the economic cliff as the prices for life’s necessities increase, but their government assistance payments either stay at their statutory level, or possibly increase very slowly.  These people will rapidly find that the necessities of life become difficult if not impossible to attain in their current economic state.  Contrast this against the people in power who “make the rules” for our economy.  The political class never seems to encounter financial difficulty while enacting the rules, programs, and entitlements that will bankrupt the country.

In the midst of this dark cloud, there is a glimmer of opportunity for those who are astute and decisive.  The way that people can overcome the forces of ruin that are converging on the economy is by acquiring economically productive assets that are purchased with fixed-rate debt.  An example of this is rental real estate, which is purchased with a fixed-rate mortgage loan.  As prices escalate from inflation, the rent and value for your investment property will increase while your mortgage payment stays flat.  People who astutely recognize the current environment of artificially low asset prices and artificially low interest rates can cement their financial future and that of their posterity.

The current environment is truly a tale of two futures, where many of the ‘regular people’ throughout the nation will be economically devastated and those who are astute will be escalated to wealth and prosperity.  For those who are unprepared, the future looks bleak and dismal.  For those who act with intelligence, the opportunities have seldom been greater.  The only question for each of us to ask is which of these people we will be.