5 ms·

Despite quantitative easing, we haven't experienced any significant inflation. In fact, we are getting very close to a deflation. If you have a very pessimisti

by mikebo 16y ago

Despite quantitative easing, we haven't experienced any significant inflation. In fact, we are getting very close to a deflation. If you have a very pessimistic view of the stock market's future, reducing risk by being in cash make a lot of sense.

joshfraser 16y ago
that's partly because the fed plays all sorts of tricks to hide the real amount of inflation they are causing. regardless of whether that inflation is visible now, it's inevitably coming. it's the only option we have to deal with that 13.3 trillion debt that we can't afford to pay.
- mikebo 16y ago
  Inflation will be an issue at some point in the future, but with high unemployment I don't think it's likely for several years. If you're risk averse, broader market decline is a bigger worry than inflation IMO.
- kargdt 16y ago
  I heard somewhere that Deflation right now is a fact, inflation a belief. One would've lost a lot of money being short long-dated treasuries this year with that belief. If inflation is the answer to this (most likely the case), would you say that it could be hyperinflation versus the milder demand-driven inflation that America is used to?- Specifically, if the Fed devalues the dollar.
riffer 16y ago
Sort of. There's a real tendency to look at these CPI prints and say that inflation is low, but that is only one aspect of inflation. Aggregate price inflation has been low over the past several years. A big part of that is that energy prices are much lower than they were three years ago (remember $4+ gas?). That is only a very temporary phenomenon (long term supply is constrained, demand is exploding as Asia develops), and in any case energy is only one part of the economy. But asset inflation is a real problem. That is why the price of gold has tripled in the last half dozen years. If you put money into either stocks or cash 5, 10, 15 years ago, you're way behind where you would be having put the money into a store of wealth that is portable and not subject to inflation.
- cynicalkane 16y ago
  Gold doesn't do anything, except in some specialized applications. Suppose you had some completely arbitrary asset. Kneezles. Over the last few years, the price of kneezles have tripled. The kneezle-bugs come out of the woodwork and say, "Look, if you had invested in a store of wealth that is not subject to inflation, you'd be doing better. Your kneezle-denominated wealth has fallen greatly." Well, what are kneezles anyway? They're lumps of metal that don't do anything. Hey, sounds familiar...
  - lionhearted 16y ago
    > Gold doesn't do anything, except in some specialized applications. Neither do paper dollars - it's an abstraction that has been historically coveted and accepted as money, and that's why it's valuable. I'd take gold alternative to paper money if someone wanted to pay me in it and had proof of its purity.
  - riffer 16y ago
    Gold doesn't do anything Gold is a store of value. Stores of value provide a useful function in society. Very few things actually qualify as stores of value, and gold is the most known of them so I used that, but you could replace the string 'gold' with 'store of value' in my argument without changing the substance of my argument.
    - cynicalkane 16y ago
      "Store of value" is the technically correct term, I suppose, but it's a misleading term because it doesn't actually store any value. The term "store of value" actually refers to currency, except civilization outgrew using cumbersome lumps of shiny metal to conduct its transactions.
    - gills 16y ago
      Gold is a speculative device. Humans hold the future value one might hope to trade the gold for.
    - nostrademons 16y ago
math 16y ago
The inflation/deflation debate is fascinating to follow, and in my eyes currently the most important topic to make a correct call on financially. I'd recommend searching for "Mish" to learn more about the arguments on the deflation side, and "Marc Faber" on the inflation side. Both offer compelling arguments and both are entertaining to read.. My best guess is QE will eventually catch up with the US but it could be a while coming.

by mikebo 16y ago

joshfraser 16y ago

that's partly because the fed plays all sorts of tricks to hide the real amount of inflation they are causing. regardless of whether that inflation is visible now, it's inevitably coming. it's the only option we have to deal with that 13.3 trillion debt that we can't afford to pay.

mikebo 16y ago
Inflation will be an issue at some point in the future, but with high unemployment I don't think it's likely for several years. If you're risk averse, broader market decline is a bigger worry than inflation IMO.
kargdt 16y ago
I heard somewhere that Deflation right now is a fact, inflation a belief. One would've lost a lot of money being short long-dated treasuries this year with that belief. If inflation is the answer to this (most likely the case), would you say that it could be hyperinflation versus the milder demand-driven inflation that America is used to?- Specifically, if the Fed devalues the dollar.

riffer 16y ago

Sort of. There's a real tendency to look at these CPI prints and say that inflation is low, but that is only one aspect of inflation. Aggregate price inflation has been low over the past several years. A big part of that is that energy prices are much lower than they were three years ago (remember $4+ gas?). That is only a very temporary phenomenon (long term supply is constrained, demand is exploding as Asia develops), and in any case energy is only one part of the economy. But asset inflation is a real problem. That is why the price of gold has tripled in the last half dozen years. If you put money into either stocks or cash 5, 10, 15 years ago, you're way behind where you would be having put the money into a store of wealth that is portable and not subject to inflation.

cynicalkane 16y ago
Gold doesn't do anything, except in some specialized applications. Suppose you had some completely arbitrary asset. Kneezles. Over the last few years, the price of kneezles have tripled. The kneezle-bugs come out of the woodwork and say, "Look, if you had invested in a store of wealth that is not subject to inflation, you'd be doing better. Your kneezle-denominated wealth has fallen greatly." Well, what are kneezles anyway? They're lumps of metal that don't do anything. Hey, sounds familiar...
- lionhearted 16y ago
  > Gold doesn't do anything, except in some specialized applications. Neither do paper dollars - it's an abstraction that has been historically coveted and accepted as money, and that's why it's valuable. I'd take gold alternative to paper money if someone wanted to pay me in it and had proof of its purity.
- riffer 16y ago
  Gold doesn't do anything Gold is a store of value. Stores of value provide a useful function in society. Very few things actually qualify as stores of value, and gold is the most known of them so I used that, but you could replace the string 'gold' with 'store of value' in my argument without changing the substance of my argument.
  - cynicalkane 16y ago
    "Store of value" is the technically correct term, I suppose, but it's a misleading term because it doesn't actually store any value. The term "store of value" actually refers to currency, except civilization outgrew using cumbersome lumps of shiny metal to conduct its transactions.
  - gills 16y ago
    Gold is a speculative device. Humans hold the future value one might hope to trade the gold for.
  - nostrademons 16y ago

math 16y ago

The inflation/deflation debate is fascinating to follow, and in my eyes currently the most important topic to make a correct call on financially. I'd recommend searching for "Mish" to learn more about the arguments on the deflation side, and "Marc Faber" on the inflation side. Both offer compelling arguments and both are entertaining to read.. My best guess is QE will eventually catch up with the US but it could be a while coming.