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Tuesday, August 30, 2011

Inflation-the only game in town!

Anybody who has been watching the latest developments with both the Fed announcing that they will not raise interest rates until 2013 and the MPC who are now looking less and less likely to raise interest rates until well into 2012 can guess the name of the game.

The name of the game is 'INFLATION'.

None of the central bankers will admit to it. This is because deliberately engineering an inflationary environment would be seen as fiscally and administratively irresponsible. However, who are now the biggest debtors in town? Governments of course having now taken on the debts of the banks by bailing them out.

I leave you to draw your own conclusion as to their true motivation given that inflation is a debtors best friend.

Investing Alternatives

When it comes to investing in times of high inflation. You could stick you money in a lump of metal like gold. The only thing is what is a lump of metal that pays no interest will have a short and limited appeal. A bit like the emperors new clothes - at some point the market will wake up to the fact that are invested in a piece of useless rock.

The other hedge against deflation as my and many other parents realised during the 70's was property. Borrow heavily and before you know it your loan will have been whittled down to nothing and you are left with an income producing asset.

Hey - being a landlord isn't such a bad place to be is it!

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