What is Goin ‘On
Posted in Plain Politics on August 31st, 2006Yet again I am forced to determine “what is goin ‘on”
I’ll tell you, we are all absolutely flummoxed.
If someone follows the markets - is it inflation or deflation? As a serious question it could not be asked other than during a few months in the decades behind us. In 1971, ask inflation or deflation? Impossible because everyone knew we was an inflation. Deflation means people do not buy because they expect lower prices in the future. In 1971 inflation was clear.
Today, well your portfolio should have long term bonds (rates are historically low but if things go deflationary nothing will be as good as a long term bond paying interest.) During the Depression deflation, a fixed rate long term treasury bond was as close as you could get to nirvana.
Here’s the kicker, no matter what anyone claims, no one knows if we are in a deflation or an inflation. Real estate is valued higher then ever in the history of the American financial system by any measure, a real estate implosion, as NASDAQ did, would lead to deflation and reduced prices. Everyone would hord cash just as they did in Japan for the last fifteen years.