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Imagine that our government will respond to the enormous debt and deficit ... by printing more money (not too far fetched). Suppose that printing more money will create spiraling inflation (a logical by-product).
Where do you think the investment opportunities are today to take advantage of tomorrow's inflation ... (silver, gold, borrowing & hanging onto cash, ???).
I would argue that printing money is not as important in today's environment as the extension of credit. Until the banks relax and let people borrow again, inflation will be very tame. And since banks benefit from low inflation, it may be a while.
Extension of credit and printing money basically amount to the same thing.
The issue is expansion of money supply without a corresponding increase in productivity (e.g. US residential suburban housing).
The best investment is in enterprises and/or assets that add real value to the economy, whether global, national, regional, or local, regardless of inflation.
Do silver and gold add value to the economy? Maybe, maybe not. Does borrowing? What do you do with the borrowed money? How about holding cash?
As for general passive investments that you can access through mass capital markets, I like corporate and other specialty bonds, on the one hand, and real assets that produce income, on the other, each with global diversification. I would stick with the strategic sectors, like energy, utilities, agriculture, and commercial real estate, possibly also war-related manufacturing, again with global diversification, but not commodity futures and such which is more trading/speculation than investment.
Sonarrat is more perceptive when it comes to paying more attention to what the FRB does than what they do -- if more people did the same gold would NOT be as ridiculous inflated as it is!!
Just about anybody with a pulse understands that OVER THE VERY LONG TERM it will inevitable to see inflation rise from where it currently is, however that CANNOT HAPPEN with interest rates so incredibly low. How long will they stay low? Until borrower demand increases / investors demand more return. When will that happen? Who knows...
There are DOZENS of different kinds of scenarios as to what TYPE of inflation will be the biggest factor going forward -- price driven, wage driven, lender driven, Fed driven. Hard if not impossible to essentially "hedge" against all of 'em. Better to be in a position to not get pinned in by ANY of the scenarios and invest with some balance / level headedness instead of WILD speculation. Remember: Bulls make money, bears make money, PIGS get slaughtered -- if you think you have some "scheme" to beat both those bullish and bearish YOU will be the one that ends up screwed...
I would argue that printing money is not as important in today's environment as the extension of credit. Until the banks relax and let people borrow again, inflation will be very tame. And since banks benefit from low inflation, it may be a while.
Excellent post. Velocity of money being low means more "money" in circulation ends up with same production. Money usually finds its way to where it is most in demand but when banks are essentially taking it out of economic circulation to shore up the balance sheet then the chain is broken and inflation does not become embedded into an economy.
It's already been mentioned, but the first thing that comes to my mind is land/real estate. If I'm living in a house with a loan at 4.75% interest rate for 30 years with long term-inflation of 6%, or 8%, or 10% or whatever, that payment gets easier and easier to make. (assumptions of course that prices/wages trend with inflation and the whole bloody system doesn't collapse somehow).
Excellent post. Velocity of money being low means more "money" in circulation ends up with same production. Money usually finds its way to where it is most in demand but when banks are essentially taking it out of economic circulation to shore up the balance sheet then the chain is broken and inflation does not become embedded into an economy.
Bingo..I've had that opinion as well. Inflation won't happen because the money is not getting to "the people" on the street..it's staying in the banks.
I think for most people real estate is a good deal esp with low rates now. In most areas the payment is equal to rent, you get cheap money and you have leverage for when the price goes up. What I am not able to figure out is location; with gas price and jobs being so dynamic, one might buy in a place that would be a ghost town in 10 years.
Bingo..I've had that opinion as well. Inflation won't happen because the money is not getting to "the people" on the street..it's staying in the banks.
until wages and income grow real broad inflation wont happen. if food and energy suck more of our money its at the expense of us having bought or done something else.
as long as we can only do or buy this or that and not this and that inflation should be tame for a bit.
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