History shows that all countries inflate when this is too much of a problem. That is why I stay in an index fund. A fund, commodities and RE are the best thing I know for what may come.
A couple of things. Inflation is a strange beast - they tried "targeting" it for years, and very little happened. Once it kicks in gear, who knows how fast it will come about, and whether they could control it.
The Treasury has been borrowing about a Trillion a year just to pay its obligations. That's too much overspending to "inflate away". (Inflation - or, debasing the currency, is simply another way of defaulting, of going bankrupt).
Perhaps more relevantly for many of us - remember what happened between mid-60's and early 80's. The DOW topped some time in 1966 at around 1000 - and then proceeded to range, and broke out decisively above 1000 only some time in 1982 (or 83, don't recall exactly). The catch is that by then, if you had $1000 in the DOW, you still had the same amount in dollars - except that in the meantime its purchasing power was devastated by inflation. In reality, an investor lost to the tune of 70%, if not more. (RE went up in price, but below the inflation. The values during late 70's through mid 80's were tremendous).
That said, on other occasions, equities did serve well as a hedge - like during the recent debacles in Argentina, as well as in Germany in the early 1920's. Why such a difference? I don't know. But my guess is that these weren't key global economies - like the US is today (and was in the 60's-80's). Moreover, many of their investments were in more stable, foreign markets.
So, altogether, it's a tough call. If anyone knows the answers or has ideas - please speak up. |
