Dealing with Inflation

by Dual Income No Kids on June 30, 2009 · 0 comments

Hi All,

So I was sitting on the metro riding home today and was leaving through somebodys leftover USA Today. The finance section had a piece on inflation. The article basically said that because the Feds are racking up huge bills, the government will have a powerful incentive to create inflation.

The thing about it was, that they cited this swiss economist, Marc Faber. Faber is famous for having made the prediction that hyperinflation was a 100% certainty for the US. The thing is, the newspaper was the USA today. I always kinda figured that Faber was only quoted by internet freaks and hard core gold bugs. I was surprised that a reputable paper like the USA Today quoted the guy.

So it seems that the mainstream press, not just bloggers are starting to take the inflation issue seriously.

So, I don’t know what you’re planning on doing about this, but I’ll tell you this much. When and if inflation gets to around 10 to 12% I’m planning on loading up on long term debt instruments. Preferably something like 30 year t bills or an investment along those lines.

The truth is that high levels of inflation are a historically anomaly. For most of the last 70 years interest rates have been way lower than 10%. In fact, a really high interest rate would be a great opportunity, especially if one thinks about it as an opportunity to lock in a high return with low risk. It’s a signficant money making opportunity and one that could greatly enhance our wealth. So, what will be on the menu will be things like 5 year CDs and long term treasury obligations.

Best,

James

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