These two animals are the silent destroyers of many financial plans. They have been mostly tame over the last 150+ years in this country, but both are now knocking at our doors. In fact, deflation has already come in through the door and poses the most urgent threat. It devastated the world during the Great Depression and is currently causing much grief and turmoil.
On the other hand, there is a very real threat that the large scale actions by the Federal Reserve and lawmakers in the U.S. may bring about serious inflation on a scale that has not been experienced in this country since its early days.
We should clarify that there are two types of inflation that we see as a threat.
First, we are talking about the “rate of fall” (of the value of the dollar) when we are talking about a steady decrease in the dollar’s purchasing value. Anything that the U.S. has seen in the last 100 years, we would place in this category.
Second, we are talking about very rapid adjustments to the purchasing power of the dollar or an “already fallen” dollar. This happens very rapidly and usually without much warning. It comes about when governments increase the money supply rapidly and the markets finally catch on. While someone in shorter term CD’s or TIPS could adjust partially to a high “rate of fall”, by earning interest at the new higher rates, rapid adjustments diminish purchasing power before there is any time to earn interest.
At Desert Rose, we are not doom and gloom people. We are not saying that any of the above scenarios will take place and we hope that they don’t. We don’t pretend to be able to know just what will happen, but we can prepare as best we know how, while continuing to strive to make more money with less risk in the meantime. We kill two or three birds with one stone, so to speak. We chuckle when we hear the solutions that some of the news pundits put forth to solve these two threats of inflation and deflation, not because they’re stupid, but because what we do here at Desert Rose is so much better.