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<p>[QUOTE=&quot;Cloudsweeper99, post: 687692, member: 3011&quot;]One thing that isn&#039;t commonly realized is that inflation and deflation is the same disease manifesting itself in two different ways -- the problem is lack of purchasing power.&nbsp; With deflation, there isn&#039;t enough money in the hands of people and the value of the assets they own is declining.&nbsp; With inflation, the money in the hands of people just doesn&#039;t have enough purchasing power and the value of the assets they own isn&#039;t keeping up with the loss of purchasing power of the currency.&nbsp; It is very possible that we will see inflation in the price of necessities at the same time we see deflation in the value of assets.&nbsp; Deflation = lower asset prices.</p><p><br /></p><p>I wouldn&#039;t predict a market crash.&nbsp; Market crashes are very low probability events.&nbsp;&nbsp; But it might be very very difficult to make any money in bonds and stocks for years to come -- or maybe not.&nbsp; How can anyone know for certain?</p><p><br /></p><p>Inflation has already hit hard with the monetary expansion from the various bailouts.&nbsp; It hasn&#039;t hit the prices on the shelves of stores yet because they have been working down old inventory.&nbsp; Since the CPI no longer measures a fixed basket of goods and services, it might not hit the public conscience for another year or perhaps two.&nbsp; Remenber history -- the government ran a &quot;guns and butter&quot; economic policy from the mid-60s onward, but inflation wasn&#039;t a problem until the early 70s, and double-digit inflation didn&#039;t hit the evening news until the mid-70s.</p><p><br /></p><p>When inflation hits, don&#039;t jump into equities to quickly.&nbsp; I know the theory is that the ownership of things, and stocks, will protect your purchasing power, but it didn&#039;t work that way in the 70s and probably won&#039;t again.&nbsp; Be patient and the opportunity will come.&nbsp; Real estate did much better in the 70s, but there wasn&#039;t as much debt around back then so it might not repeat.</p><p><br /></p><p>Contrary to everything you hear, holding a large percentage of investment dollars in cash isn&#039;t a bad strategy if there is inflation.&nbsp; Sure they are losing purchasing power, but interest rates should be rising by then if we have inflation, and cash is king if we have deflation.&nbsp; Your cash won&#039;t lose purchasing power as quickly as markets can crash, so the cash may actually increase in relative purchasing power even if it declines in absolute purchasing power.</p><p><br /></p><p>Everyone has to decide for themselves how much to hold in bullion.&nbsp; You must reconcile yourself to the fact that there is almost no way to beat the inflation monster.&nbsp; Even if you hold gold, it may become subject to a windfall profits tax or outlawed altogether since societies under duress tend to change the laws to punish the intelligent and the lucky.</p><p><br /></p><p>Good luck to us all.[/QUOTE]</p><p><br /></p>

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