Their financial repressionary thesis points out that bond prices don’t necessarily have to go down for savers to get skunked during a process of “debt liquidation.” The argument over whether the end of QEII on June 30 will result in higher yields and lower Treasury bond prices is, in a sense, a secondary one. Even if 10-year Treasuries stay where they are at 3.30%, and fed funds close to 0%, savers and financial intermediaries are being shortchanged by both of these yields and everything in between…READ MORE.
My Take: I love Bill Gross and his regular op-ed pieces are something I do not pass up, but it doesn’t take an investor of Bill Gross’s caliber to foresee what he is discussing in this weeks piece. The government has a huge amount of debt and one way to get out front under that debt is to inflate…as in inflation of the currency. Inflation is the grim reaper that comes hidden in more ways than I would possibly want to write within this blog.
Gross is primarily concerned with investments in such things as Treasuries, which have very low yeilds. Thus, the yeild isn’t even covering the devaluation of your money through inflation.
Since the fall of 2008 I’ve stated that the government would bring about inflation as one of its principle ways to ease its debt problem. I wasn’t the only one because it is something that has happened in the past and will happen some place some where in the future. Yet, since this great evil is upon on us, what the heck are we to do?
One area I think you should consider is Canada. Stability and a plethora of investments that are very good inflation hedges. Canada is home to a large amount of companies that deal in natural resources. Whether it’s a bond or stock, Canada is an area where you can turn to, if you are worried about your domestic investments and their inability to hedge against inflationary pressures.
For more information about inflation, I’d recommend you watch a video I produced over a year ago: Protecting Your Portfolio Against Inflation