The PP is premised upon the following assumptions:systemskeptic wrote: To address your second point: in the view of many on this board, a US PP performs in "all economic conditions" yet to my view it only performs in two: US prosperity and geopolitical/currency crisis. The short of it is the world (and all it's invest-able assets) is far too big of a place for any investment to be as risk-free as you seem to believe.
1. At a given point in time, the economy can only be on an expansion trajectory or a contraction trajectory. It's possible for the economy to be neither expanding nor contracting, but such a condition rarely lasts for very long.
2. At a given point in time, price levels across the whole economy are either increasing or declining. It's possible for the price level to be neither increasing nor declining, but such a condition rarely lasts for very long.
What combination of economic conditions can you visualize that wouldn't fit into one of the four combinations of conditions based upon the assumptions above?