Saturday, September 15, 2012

Natural hedge against Inflation and Currency Depreciation.

From the wisdom of Buffett in a meeting with MBA students from the Richard Ivey School of Business

Will the U.S. dollar continue to be the world’s safety net?

- There is no question that the US$ will lose purchasing power over time. All paper currencies depreciate. In terms of how it will fare relative to other currencies is less certain.

- Depreciation is sad because it hurts unsophisticated investors and people who trust in the government.

- Best way to hedge against the dollar is to buy a house in a growing area and take out a 30 year 4% mortgage.  You are effectively shorting the dollar.

Remember, home can buy anytime as long as you can afford it. But investment properties must think carefully. I am still looking.


farmland investments said...

You make a very good point. Its' not just the dollar, but all fiat currencies that are depreciating. In the past, most currencies - at least in the West - were actually backed by something of real value, usually Gold. Under a fiat money system, there is literally no limit on the amount of money that can be created by the government, as the money is tied to nothing at all but the government's decree. What happens if there is a widespread loss of confidence in a fiat currency? Look at Weimar Germany for your answer.

Lauryn said...

Well I have to agree with you regarding the purchasing power of the USD because every currencies in the world do have the tendency to depreciate over time more especially when the people governing bullish economy is not prepared for the turbulence of worldwide trade. I love Forex and thru trading binary options I can fully understand how the currrencies goes up and down, a slight bad news could have a triggering effect on it's value.