Your money is safe with Yglesias, trust him

Yglesias says you don’t need a safe haven investment, since the government has already created one for you.

Since Yglesias says it, it must be true. Even though I’m sure I’m wrong, I’m not convinced by Yglesias’ argument.

TIPS are yielding a measly two-ish percent. (After all, their measure of inflation excludes things like food and energy and housing. I would have naively thought that you’d want your "safe haven" investment to protect you against increases in the prices of the things you actually buy, but I’m not smart enough to figure these things out).

My bigger problem with this advice is that I think US government debt is in a bubble. It’s almost like someone who can print money is buying those things (don’t worry, it’s not a problem because they’re only buying old Treasuries, which don’t impact the price of new Treasuries, apparently – so much for basic economics).

Of course, if Treasuries really are in a bubble, people who think that the low interest rates on Treasuries mean that the US government should borrow more will end up looking really dumb.

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10 Responses to Your money is safe with Yglesias, trust him

  1. anonymous says:

    “The bounties of the free market don’t provide anything, but they have provided plenty of solutions to the problem gold is supposed to solve. ”

    Err, what?

  2. Asdf says:

    Saving investment. Non consumption of a banana today doesn’t mean anything more then a rotten banana a month from now. We suffer from a lack of a mechanism to turn savings into investment in both the public and private spheres.

    However, there is a demand for future consumption and a glut of current consumption. While one could say that negative interest rates represent a bubble, that depends on the value of present vs future consumption. Or put another way, us government bonds may be the best horse is a glue factory.

  3. Dave says:

    Here’s the most relevant Moldbug post on competition in vehicles of savings:

    http://unqualified-reservations.blogspot.com/2008/02/return-to-castle-goldenstein-gold.html

    Decide for yourself which course of thought is based in reality.

  4. Abelard Lindsey says:

    I don’t take investment advise from liberals…Ever.

  5. Anonymous says:

    I thought TIPS tracked CPI-U (*inclusive* of energy and food)?

    • Bill says:

      That’s what the Treasury web site says, CPI-U. That’s also what the BLS (the guys who calculate inflation) say. This “inflation does not include food & energy” stuff seems to be some kind of urban legend on the delusional “right.” It’s not really the kind of thing you ideally want to be saying if your schtick is that you’re giving people the real truth about the modern state. It’s also completely irrelevant to the main point of the post, so you gotta wonder what’s going on with it.

  6. Bill says:

    On Yglesias’s point, Jim had a blog post on this some time ago. Gold and TIPS hedge against different things. TIPS is a hedge against inflation, assuming that the overall financial system more or less stays intact. Gold (in your physical possession, of course) is a hedge against the overall financial system ceasing to operate. Jim recommends beans, rice, and guns as a hedge superior to gold for this purpose. Gold in an account somewhere is gambling, like any other commodity.

    • Foseti says:

      I’ve had a fair amount of money in commodities for quite some time. My return has been well above CPI for a long, long time. If CPI tracks these things, it doesn’t result in a measure that actually protects you against inflation in the prices of commodities.

      Lots of the confusion relates to the fact that core CPI actually excludes these things: http://en.wikipedia.org/wiki/United_States_Consumer_Price_Index#Core_CPI

      It’s hard to remember which things use core CPI and which use the broader measure.

      Inflation measures something that doesn’t really exist – “the general level of prices” is a concept (sometimes a useful one) but it’s not an actual thing. That makes a measure of inflation relatively easy to massage, shall we say. See: http://www.shadowstats.com/alternate_data/inflation-charts

      On Aug 14, 2012,

      • Dave says:

        Foseti,

        I have a question as a fellow Fed. How do you invest your TSP? I have everything in the F fund waiting for Europe to drop…

      • Foseti says:

        I split it evenly between the equity funds and just forget about it. I don’t really like the strategy, but there’s much you can do that’s interesting.

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