It is all over the Web what I think. I think there will be price inflation . . . for a time. I think there will be mass inflation . . . for a time. I do not think there will be hyperinflation and currency collapse. But, if there is, I will be in far better shape than most people. That is because I have adopted Ludwig von Mises's investment strategy. When asked what inflation hedge he had, he replied: "Age." This is the one hedge that works equally well in both inflation and deflation.
People buy investments for lots of reasons, but careful logic is not the main one. They feel the drive to buy. It may be gold. It may be an annuity. It doesn't matter. People have heard about it, and they want it. They go looking for reasons.
The same is true of people who have decided not to buy.
Some people are action-oriented: early adopters. Others wait a long time to act. They are the people who make early adopters rich . . . the early adopters who really did see coming what in fact came.
Most people are late adopters. They sit on the sidelines. They wait to see what their peers do. Their peers do the same thing.
For these people, arguments are wasted. They are not looking for arguments. They are waiting for the herd to start running. They want to be at the center of the herd. That is the safest location to avoid predators.
THE CENTER OF THE HERD
The center of the herd is safe most of the time.
What threatens the zebras in the center is this: The zebras at the front of the herd get the better grass.
We are in an economic drought. It is neither price inflationary nor price deflationary. It is a slow-growth economy in which unemployment remains high. Promotions are few and far between. Raises are rare. Income is slowly falling. Income in the private sector is falling even faster.
I recommend that people concentrate their efforts on their careers.
People are hypnotized by their IRA or 401(k) plans. These plans are down since 2000. An entire decade is gone. The experts who advised buy-and-hold, no-load stock funds have proven themselves utterly wrong. They do not change their advice.
I recommended getting out of stocks, especially dot-com stocks, in March of 2000. That was the week of the top for the NASDAQ. I recommended getting into gold in October 2001 - close to the bottom: under $300.
Did people do it? I doubt it.
Did they stick with their stock portfolios? Yes.
They are still alive. They are not poor. But they have not made gains. If they borrowed on their homes, they have lost their original loan's non-recourse protection. They are liable for all of their mortgages, even if they sell. They must make up the difference. They are trapped.
Nobody warned them, except fringe e-letter writers. They did not read the loan contracts. They did not ask their CPAs, if they had CPAs.
Now they look around them and find that being in the center of the herd gave them protection from the crocs and lions, but the grass is depleted.
The economic drought is going to get worse. If you think I am wrong, read what David Stockman writes. He was Reagan's first budget director. He warned about the huge deficits that would come if Reagan did not cut Federal spending to match his proposed tax cuts. He resigned. He saw what was coming. Now it has arrived. He now warns against the enormous Federal deficits and their anti-growth effects on the economy.
There comes a time to move to the front of the herd. This is especially true when the lions seem distant, and the crocs do not seem close to the water's edge.
Most people do not want to be at the front of the herd. This is just as well, because they could not get there even if they wanted to.
I suggest that you spend your time working on your career before you worry about gold, price inflation, or price deflation. Your main problem is that the grass is getting sparse.
About four decades ago, conservative sociologist Robert Nisbet offered this bit of advice to the Federal government:
"Don't just do something. Sit there!"
This was a variation on the more traditional advice, "Don't just sit there. Do something!" His is far better advice.
The case for doing nothing new is a strong one. As a conservative, he understood this. Most of our lives are routine. We do things today pretty much the way we did them yesterday. This is how we keep our sanity. If we had to re-think everything every day, we would go mad. We would wind up paralyzed.
By assuming that things tomorrow will be pretty much the way they are today, we will probably be right tomorrow. We will not lose time, sleep, or money planning for events that do not take place.
Yet there is always change. Most things do not change rapidly, but some do. Nine-eleven came along, and Bush's Executive was there with Clinton's Homeland Security legislation ready to be implemented. The bureaucrats had planned ahead.
"Never let a crisis go to waste," Obama's Chief of Staff Rahm Emanual has said. This is the radical politician's view of social change. "Be prepared!" Voters are far more ready to surrender their liberties than to fight politically to get old liberties back.
This, too, is the philosophy of conservatism. "Stick to the devil you know." That was Rudyard Kipling's advice in one of the greatest poems ever written: "The Gods of the Copybook Headings."
So, most of the time, don't just do something. Sit there.
Your goal is not to stay seated. It is to give yourself time to read, then think. You need to know what you are facing. This takes time and concentration.
But until you have a sense of what you are facing, it is best to take no action other than reconnaissance.
People prefer inaction to action. This is wise most of the time. But sometimes it is unwise. I think we are in such a time.
Pay attention to your career and your job. Concentrate on these if they are not the same.
Think: "How will my career or job do under conditions of mass inflation? Depression? In between?" Think about these effects on your job, not your portfolio.
People get sidetracked. They think that buying this or that investment asset will save them. What will save them is their ability to stay ahead of the lions and out of leaping distance by the crocs.
It is not your investment portfolio that matters most. It is your career. There are no one-shot answers for your career. You can't write a check and solve the problem.
Gary North is the author of Mises on Money.
He is also the author of a free 20-volume series,
An Economic Commentary on the Bible