Inflation is effected by many factors.
1. Money supply - How much actual money is printed by the US. The more you print the more it dilutes the value of the money that is already in your pocket.
Agreed. Some of the articles and commentaries I've been reading suggest the Treasury will drain/resorb some of that excess money supply when they think it safe to do so, to help contain that inflation factor/dilution of value), put us back into low-moderate inflation condition.
2. Fed. Funds Rate - This is market value of our US Treasuries that we rely on heavily to fund our Govt. due to deficit spending. If our rate is zero and Germany is giving 2%, why would China buy our Treasuries. (
exactly-our Treasuries will be sold to buy German value (best deal in Europe right now), creating excess supply of treasuries that will need to be repatriated back to the U.S.-read increasing interest rate as T-bond prices fall.)
3. World perception - The US dollar was considered the fail safe currency and this is why gold and oil is traded world wide in dollars. We are failing to provide that confidence and there is talk of trading oil in Euro's. (
timing and actuality of any such change is the biggest unknown)
I'm sure I missed some things and some point but that is the general layout.
Basically we are seeing a deflation of all commodities due to a weakening world economy. IMO, once we hit rock bottom inflation will kick in (
yep-how high it will be allowed to go is another of the big unknowns, see #1, remember Volker, the early 80s). Just look at historical graphs of gold prices from the Great Depression forward and you will see a pattern.
We can not predict when it will hit. How to prepare for it is to delay retirement (
part of my considerations for decision-making between 2017-2023) and take advantage of the COLA.
Buy a small position of Gold to hedge against inflation. (
It's somewhere on the list, other ideas coming first tho for me-hope I'm not sorry I dilly-dally).
Food inflation will hit so gardening and chickens could be helpful. Already working on the gardening angle, contemplating chickens as next step after that. Our families survived Depression and WWII with home gardens.
Owning some energy sector.
Still trying to decide when and which part of the sector but it's on the list.
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