I'm far past the point of getting angry at the Fed. There's no point in worrying about bankster corruption and moral hazard. You have to just take a cool calm perspective and structure your portfolio in proportion to the probabilities of the most likely scenario. That doesn't mean not accounting for the growing chance that this whole thing may still come crashing down.
It's an active debate between the inflationists and the deflationists. There are some really smart people like Luke Gromen and Lynn Alden (and not just goldbugs like Peter Schiff) who are in the inflationist camp - they think that the Fed is going to do whatever it take to prevent deflation, prop up asset prices, and relieve dollar shortages abroad. While they acknowledge that there's likely to be a scramble for dollars once the economic damage and debt overhang becomes clear, there's just too much political pressure for the Fed to let the bad debt go bankrupt and will likely monetize it and keep funding huge deficits and bailouts, especially in an election year. Print first and ask questions later.
The deflationists say that there is simply too much debt in the system and money velocity will remain too low in the near future, and low/negative interest rates exacerbate it because it forces baby boomers to save even more. There is too much debt that will have to be defaulted on, especially outside the US (dollar milkshake theory), and will lower the money supply. No one is spending money - everyone who can is saving and paying down debt, so how can prices go out of control?
Not to mention that we're seeing huge disconnects in different industries - price inflation in food and consumer staples and PPE equipment while cruise tickets and used cars are on sale. As Tail Gunner mentioned above, inflation/deflation manifests differently in different sectors.
Telemedicine/online learning and AI may actually bring down costs in healthcare and education if disrupters were allowed to smash the status quo, and these sectors had the highest inflation in the last decade due to corruption/collusion and government interference (regs on insurance companies, subsidizing elderly/obese medical care, brainwashing students that college was necessary and subsidizing their loans). So not everything is a monetary phenomenon.
Urban penthouses may go on sale while cabins in the woods and farmland get multiple bids. So while this inflation/deflation debate is playing out we'll have some industries going bankrupt while others are capitalizing.
Both sides have valid arguments and the question is will there be sufficient warning and lead time before the dollar collapse to reposition your portfolio into fixed rate debt and precious metals just right before debt monetization starts? If you wait in cash now will you still be able to get physical precious metals and a 30 year low fixed rate mortgage at that point? Or, by going all in on the inflation argument are you giving up the opportunity to buy some quality assets on the cheap in the next few years? Should overvalued large cap equities still be a core component of an inflation hedge strategy?
What if gold rises during deflation alongside a rising dollar? What role does bitcoin play in all this?
Curious to hear comments.
