Saturday, November 17, 2007

The name's Bond, Negative-Return Bond

Adrian Ash reports that pessimism has made bond prices soar, which in turn means they're a terrible investment for inflation-dodgers. He gives this graph:
Naturally he thinks this boosts the argument for gold, but I'd suggest that remorseless monetary inflation simply means that we need to store our excess wealth in a diversity of things. We just need to be careful not to pay too much, as the waves of excess liquidity temporarily make this or that asset bob high above its longer-term trend.

4 comments:

dearieme said...

And global warming too. I'm going to stock up on silk shirts.

Randy Higham said...

Too much wisdom for one day, Sackerson.

Pier said...

What counts is Buying Power and not inflation.

CPI gives anyone a meaningless measure. There is no such thing as a Monolithic Price, one number, that captures all price data -- only what bogus economists tell you.

Inflation happens when those in power (central bank) increase internal trade through these: increased number of opened contracts, increased rate of cash payment transaction settlement.

The rate of inflation is the rate of accretion of new cash (notes and coins) into circulation plus accretion of new consumer credit (30 day balances).

CPI gives the basis for a fake analytical framework. You can tell any story that you want to tell, simply by changing what want included into the CPI.

SACKERSON said...

Welcome, Pier. I agree with your comments - and it's in the government's interest to keep down the official figure for inflation, since it has so many dependants on inflation-linked benefits.