Friday, December 04, 2009

Confronting the Inflation Boogeyman

Hearing a lot about Gold lately? Comparison of America to Zimbabwe? Is America a Banana Republic? Hyperinflation has become the buzzword, but is it real and is it a possibility?

The answer is not easy, evidence suggests we are not heading toward hyperinflation, defined as a 50% inflation....per month! However, given the events of the past decade one cannot rule anything out.

I wouldn't bet on a hyperinflation, but I do believe inflation will be an issue in the intermediate to longer term.

Don't discount the possibility of a short-term recovery fueled by speculation, low interest rates, massive government spending and misplaced euphoria (sound familiar?). While 2010 could bring with it the complete disintegration of the banking system, it could also bring the sense of relief, that prosperity is back and things are okay again. Don't be lulled, be on the defensive - but part of the point of the linked too article is to be careful of going overboard in your defense.

Scott Dauenhauer CFP, MSFP, AIF