In the last 10 weeks, Bernanake has increased the monetary base (the second step in the money creation process) by 69%. Federal Reserve Credit, the first step, has increased by 145% over the same period. So there is a lot more money in the pipeline coming through. The money supply proper will increase more slowly, over the next 6-12 months. But if they stop here, then we will have more than a doubling of the U.S. money supply and a corresponding increase in prices.
Keep in mind the debt is 11 trillion with possibly another 5-6 trillion added on. In comparison, GDP is 13.8 trillion
-->With the above mentioned, I have thought about Yen, Gold, and Oil.
Yen seems like a more stable currency, however Japan is small and correlated to the US.
Gold is known to be a good hedge, but what does it really do? I mean you can't live with gold. A
Oil on the other hand is a vital resource for the economy. Even if things go bad, oil will be needed eventually. As the $ go down, it will go up. The only downside I see are potentially more gas taxes decreasing demand or it going down to $30/barrel which is still not that far down
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The problem with buying gold or oil ETFs to hedge against inflation is that you could easily lose a lot of money if the inflation doesn't materialize. Not a very smart hedge.
smackfu said:The problem with buying gold or oil ETFs to hedge against inflation is that you could easily lose a lot of money if the inflation doesn't materialize. Not a very smart hedge.
Also what if our new president decides one infrastructure project is to convert homes from oil to hydro electric. Oils risky.
I don't have any answers, and I agree that it's a good idea to prepare for inflation, but here's a few random points.
The trillions of dollars that Ben is spending can be disappear into our incredibly messed up financial system, which is currently deleveraging. I don't think it's as simple as increased money supply = increased inflation. more info
If you think our debt to GDP ratio is bad, you might want to check what it is for Japan before you invest in Yen (195% according to Wikipedia). I actually think Yen is a decent investment, but buying Yen because you think the US debt is too high seems silly.
I think a lot of gold's current value is because many people think the fiat money system will collapse. They may be right, but if they are not, it seems unreasonable for gold to cost almost as much as platinum.
Metric said:smackfu said:The problem with buying gold or oil ETFs to hedge against inflation is that you could easily lose a lot of money if the inflation doesn't materialize. Not a very smart hedge.Also what if our new president decides one infrastructure project is to convert homes from oil to hydro electric. Oils risky.We're about tapped out in terms of hydroelectric capacity. Plus, environmentalists are promoting the idea of getting rid of dams, not building more of them. Maybe you mean nuclear power?
Buy a house, get as long a mortgage as you can. That way, you benefit doubly. First, high inflation => higher rates. Second, high inflation => R/E prices go up.
tolamapS said:Buy a house, get as long a mortgage as you can. That way, you benefit doubly. First, high inflation => higher rates. Second, high inflation => R/E prices go up.
If you have a fully-paid house, get a mortgage.
exactly, i forgot to add finance the hell out of your properties
czarandy said:You should be more worried about deflation. Last month's -1% inflation rate was the lowest in at least 60 years.Heh, I'd like to see oil keep up that amount of deflation.
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