The Only Thing Being Truly Debased is your Intellegence

“The dollar has lost 90% of its value since 1955 – buy gold! Buy Bitcoin! You’ll lose the value of all your money.” This line of argument is garage – a lazily thought out sales pitch. In the lowest risk asset, you would have made a real return of 62% over that time period.

Here’s a table showing average yearly inflation as well as nominal and real returns for various asset classes since 1955 when Doc Brown thought up the Flux Capacitor.

That’s right. If you bought a boring 3 month T-bill as your only investment for the last 65 years you STILL would have more purchasing power today than 1955. If you got REALLY crazy and bought corporate bonds you’d only have 1246% more purchasing power.

Sure if you buried your money in the backyard the dollar lost 90% of its value. Although, it’s not that bad – you could sell those $1 silver certificates for $4 now on eBay.

Here’s the really bad news if you invest in 1 oz. of Gold or 1 Bitcoin etc. In 1,000 years, you will still only 1 oz of Gold or 1 Bitcoin. There are no dividends. There are no interest payments. There is no growth rate. The only way this works out for you is if there is negative real returns for the next 1,000 years. If that’s the case, you’ll probably be worried about more than inflation.

Inflation Expectations Deflate Dollar

With the Democrats winning the Senate last night, the 10 year yield is above 1%. Why? Not because of real growth expectations. But because of inflation expectations. They are higher than when we started the year (see the blue line)!

How does this link with the Dollar? Inflation means the dollar loses purchasing power. All else equal, that means that the dollar will be worth less than other currencies.

You can see in this graph that inflation expectations and the dollar are mirror opposites of each other.

I expect this trend to continue this year – it may be a good year for foreign investments relative to the US.