[CurlyDave]

For years I listened to the conventional wisdom and was opposed to inflation because the government and the newspapers said we should be opposed.

Then one day a friend with a comparable job to mine, but somewhat greater financial success in life said to me: "Why should we be against inflation? I personally have benefitted greatly from inflation?"

I reviewed my life's financial history and realized that I too had benefitted from inflation. The only problem was that I had not properly positioned myself to take full advantage of inflation.

I started living well below my means and made some investments which would benefit from inflation. As I approach retirement I realize that these few words were the best advice I had ever received.

The bottom line here is that once a government issues paper money, inflation is created becasue it is always easier for the government to print more money than to take it in taxes. Betting that politicians will be fiscally irrresponsible is always a good bet.

[Orangedog]

Anyone who is paying attention to what is happening with the Fed in the past year and has not taken some kind of position in gold and/or foreign currencies is going to kick themselves in the next four years. By fall I'll be debt free, with the exception of my mortgage, and I'm already taking steps to hedge against that debt should things play out the way they have been going.

[aristeides]

Maybe (political) conditions have changed enough so that it can't happen again, but the whole of the 19th century was a period of long, slow deflation. So I'm not sure inflation is inevitable.

Slow deflation is tolerable, like slow inflation, but a deflationary cycle is more disastrous than any form of inflation besides hyperinflation. Deflation, besides meaning that tomorrow's price will be smaller than today's (leading people to defer purchases, which means more deflation) also means that the value of debts increases. If that increase is more than small, it results in a lot of bankruptcies, and those bankruptcies reinforce the deflationary cycle. Our governments now know how to bring inflation under control. The methods may be painful, but they are well-known. The failure of Japan to stop deflation after 10 years shows that governments do not yet know how to bring a deflationary cycle under control.