How does the PP respond to a devaluing currency
Posted: Mon Dec 10, 2018 7:11 am
First off, thanks to LazyInvestor for his earlier posts on Non-US PP's. I had to re-evaluate some preconceptions!
Now after listening to all of HB's radio shows I understand that:
1, In severe, say > 5 to 10% inflation, in a US PP, funds flow from the USD into the next most popular form of money which is gold. Since the amount of gold is less than the amount of USD, golds price rises rapidly covering losses in the other 3 PP assets.
2, In Non-US PP's, this effect does not take place. HB mentioned to an Indian caller that he would still have the gold if the other 3 assets collapsed. But he did not say gold would increase in price to cover the losses in the other 3 PP assets.
So given that his statements are still true....
If a countries economy has no growth, and a neutral change in money supply (say collapse in credit is almost exactly matched by money printing), how does the PP react? Seems like you would have just the bond interest + stock dividends ? The currency would also devalue against countries that have growth, therefore less purchasing power for imported goods.
and secondly, outside the US, you could hold almost any hard asset (including gold), to "preserve" some purchasing power. However any hard asset would not offset losses in the other 3 PP asset classes
Am I missing anything here?
Hal
ps: HB mentioned that he could not find anything that reacted strongly to "tight money" so he used cash. Secondly for non US-PP's it appears nothing reacts strongly to inflation. So a non-US PP does not respond to 1/2 of the possible economic climates?
pps: Benjamin Grahams thoughts. https://medium.com/the-intelligent-inve ... 1f4728836e
Now after listening to all of HB's radio shows I understand that:
1, In severe, say > 5 to 10% inflation, in a US PP, funds flow from the USD into the next most popular form of money which is gold. Since the amount of gold is less than the amount of USD, golds price rises rapidly covering losses in the other 3 PP assets.
2, In Non-US PP's, this effect does not take place. HB mentioned to an Indian caller that he would still have the gold if the other 3 assets collapsed. But he did not say gold would increase in price to cover the losses in the other 3 PP assets.
So given that his statements are still true....
If a countries economy has no growth, and a neutral change in money supply (say collapse in credit is almost exactly matched by money printing), how does the PP react? Seems like you would have just the bond interest + stock dividends ? The currency would also devalue against countries that have growth, therefore less purchasing power for imported goods.
and secondly, outside the US, you could hold almost any hard asset (including gold), to "preserve" some purchasing power. However any hard asset would not offset losses in the other 3 PP asset classes
Am I missing anything here?
Hal
ps: HB mentioned that he could not find anything that reacted strongly to "tight money" so he used cash. Secondly for non US-PP's it appears nothing reacts strongly to inflation. So a non-US PP does not respond to 1/2 of the possible economic climates?
pps: Benjamin Grahams thoughts. https://medium.com/the-intelligent-inve ... 1f4728836e