The subject of hard assets came from my understanding of where safety might lie, in the case of long term inflation. The "recent" mention about Alan Greenspan referenced his interview of Oct 14, 2014, available as a YouTube video or in transcript form. As usual his expanation was a cobweb of uncconnected financial gobbledegook, but a careful read poeinted up the uderlying factors of the FED, and the US Dept of the Treasury, and the original mandate that proposed the Fed existed to prevent deflation or inflation, both of which lead to depressions and recession.
It is agrrogant to think that any mere mortal could integrate the mechanisms and effects of monetary policy, but some simple observations:
The US Federal debtis skyrocketing.
Long term interest rates are being discounted.
Assets: Personal, Federal, and Banking are defined in leveraged dollars. Liquidity as a portion of these assets is so vague as to be unknown.
Long and short: a balloon. Some here on ER mentioned something to the effect that the success in creating paper money might be infinite, and to now, little to argue the point.
And so, the "hard assets" subject, and my thinking. As the value of paper dollars changes over time, and inflation rises, the Hard Assets is the counterpoint to Paper.
Imagine Venezuela... currently running inflation somewhere between 65-70%.
Which assets have basic value, to protect the individual. In a depressed economy, what items are likely to hold value and track inflation?
Two considerations:
1. To buy food shelter and the basics of life.
2. To own assets that have value in the world economy.
Most commonly accepted: Gold/Silver, precious metals.
Then items of value that support the necessities of life.
-Land
-Natural resources
-Food, Shelter
These makes sense,to a point. But not easy to segreate. As in OIL.. which has changed so rapidly in the past several months. The countries that rely on this natural resource to fund their governments are suffering.
Shelter: Yes, needed, but are the asets really "hard"? The ownership is vested in the same long term discounted debt in the illiquidity of the banks. (one more unmentioned risk factor here, the $1.3 Trillion on Student debt, just to point up the shady base.)
Esoteric items of value? Perhaps... an orginal Beatles Album?... a Van Gogh? Hmmm?
Now, as to the longer term... the recovery. Before looking at the past for historical validation, consider the current unfunded liabilities. Never (even excluding inflation) has this been so high. Little discussion about this, anywhere.
This morning one of the financial RV programs celebrated the current dip in the market as getting nearer to a base for the new Bull Market. Parhaps.
The natural question remains... What if we go to new highs and I miss it? How much will I leave on the table? On the other hand, what if it goes the other way? Then... how much will it cost to stay flexible, and day trade?
Am thinking (personally) that I'll stay with whatever is likely to track inflation, so will keep my I bonds, and trust that the government will find a way. I'll stay in my house and try to keep expenses low. Thankfully no debt.
Have you ever tried to put the whiole package together, to look for the future "what if's"? It's an awesome task, and can lead to a paranoia. On the other hand, what a fascinating subject. An intellectual exercise that can be interesting and exciting as long as its kept in perspective.
