The Corner

The Sucker Wakes

A friend in the finance biz:

I was talking to one of my Ph.D. coworkers this morning about competitive inflation of all paper currencies which will cause most currencies to remain more or less unchanged against each other, but will shatter their value against hard assets. We’re both convinced this is happening now and will continue for the foreseeable future.

Anyway, I was giving him my usual rap about Caracas on the Hudson, and how cardboard box cities will spring up in Miami, Houston and Los Angeles over the coming decade. “It’s the poor who always suffer worst from inflation.” I said.

“Not in this case,” said my friend, “because all the poor in this country are deeply in debt. They’ll all have the relative value of that debt wiped away while the middle class will end up bearing the brunt of the burden. All Obama has to do is dilute the currency and he’ll be responsible for one of the greatest transfers of wealth in human history without firing a shot.”

This was so obvious (and frankly brilliant) that I was embarrassed it hadn’t occurred to me before. Naturally this solidifies my view of the future even further.

[Me]  I share my pal’s embarrassment. Sunday I did my month-end review of our family portfolio. We’re down nine percent on 12/31/08. We’re down forty percent on 12/31/07. All that money carefully saved and invested in IRAs and SEPs, on expensive advice, is just melting away like dew in the morn.

What fools we were to save! The future belongs to the feckless masses; and if there aren’t enough of them to make the future happen, well, heck, the elites will import a few million more.

We’ve seen the light, though. No more saving for us. Following the portfolio review, we booked a family summer vacation in Hawaii. Can we afford it? No way. So what?

If you know money won’t be worth squat four years from now, what’s the logical action — save a bundle, or go in debt a bundle? Looks like a no-brainer to me.