Looking for the best macro-economical explanation for PP

[tjt]

I want to better understand the macro economical explanation for why PP works.  For instance, why do LT treasury bonds hedge against deflation?  Why is gold good during inflation?

I know it might be obvious to many of you, but I've spent so much time understanding stock valuation I never learned macro economics.  Is there a book that really explains this?  Does one of HB's books do this? 

I bought Fail Safe Investing, which is great, but didn't explain this for me.

Thanks

[doodle]

I have read two other of his books that did a little better job fleshing out his investing philosophy:

Inflation Proofing Your Investments (1981) Introduces the First Rendition of the PP and goes into more depth about the philosophy behind it. Of course this PP is quite different than current one because it was hedged for inflation.

I have also read Why the Best Laid Investment Plans Go Wrong (1987) - Which just debunks everything Wall Street wants you to believe. The last part of the book talks about the PP some more.

I haven't read any other books from Harry Browne.

For more information about the specific asset classes I would really recommend Craigs podcasts that he put together about the asset classes here: http://crawlingroad.com/blog/category/podcast/

[MediumTex]

I think a little forum mining will also provide answers to those questions.

Read up on Japan's experience as well for a modern example of how interest rates can continue falling while every other asset class struggles.

[KevinW]

IIRC the radio shows talk directly about how the assets relate to macroeconomic conditions.

[stone]

tjt, I think you can understand the PP without understanding macro-economics since different people with wildly different conceptions of macro-economics can both see that the PP works. Modern Monetary Theory and Austrian Economics enthusiasts will both give you macro-economics theories that contradict each other and the PP can make sense if you believe either or neither theory.
If you look at the historical record of how the PP and its constituent assets performed in several different countries (eg USA, Japan, UK, Iceland) and then look at what was going on in those countries, that helps give a sense of what does what when.
Your specific question as to why long term treasuries protect against deflation:- LTT will pay you a fixed amount twice a year for decades. If people expect inflation to be 3% and other assets to yield inflation plus 2%, then LTT will likely trade at a price giving about a 5% yield. The LTT locks in the market's crystal ball gazing. Even if deflation hits, you will nevertheless still get a 5% nominal yield. Other people will be willing to pay more for your LTT than you paid as it turns out to have been a bargain at the price. You will be able to sell some and use the proceeds to increase you holdings of other assets biding your time for when everyone wishes those were what they had bought when those were cheap.
LTT and gold also swing in price in their capacity as an alternative to stocks. If stocks seem unattractive, people are willing to accept a lower LTT yield or "over-priced" gold as an alternative to owning stocks.

[moda0306]

I find understanding the macroeconomics behind the PP helps my peace of mind immensely, and is interesting to boot.

I'd do my best, if I were you, to scour the board and get a real grasp of some of the more nuanced drivers that make the PP work so well.