Comments on: Nasty Mr Inflation – Part II http://7million7years.com/2009/06/26/nasty-mr-inflation-part-ii/ How to make 7 million in 7 years ... Sat, 11 Feb 2012 22:32:23 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Adrian http://7million7years.com/2009/06/26/nasty-mr-inflation-part-ii/comment-page-1/#comment-3145 Adrian Thu, 02 Jul 2009 12:15:51 +0000 http://7million7years.com/?p=2631#comment-3145 @ Jason - THREE certainties in life: death, taxes, AND inflation? :) @ Jason – THREE certainties in life: death, taxes, AND inflation? :)

]]> By: Jason Dragon http://7million7years.com/2009/06/26/nasty-mr-inflation-part-ii/comment-page-1/#comment-3142 Jason Dragon Thu, 02 Jul 2009 08:50:01 +0000 http://7million7years.com/?p=2631#comment-3142 I can't imagine a world where inflation will be less than 5% with the sort of spending that our governments are doing now. I am planning on it being 5-7% during the next 20 years. I can’t imagine a world where inflation will be less than 5% with the sort of spending that our governments are doing now. I am planning on it being 5-7% during the next 20 years.

]]> By: traineeinvestor http://7million7years.com/2009/06/26/nasty-mr-inflation-part-ii/comment-page-1/#comment-3111 traineeinvestor Fri, 26 Jun 2009 11:43:25 +0000 http://7million7years.com/?p=2631#comment-3111 There are (at least) two problems which arise when trying to protect against future inflation (apart from the uncertainty over how much inflation we will experience). The first is that, in this context, inflation is a personal thing. It is quite possible that your personal rate of increase in living costs will be higher than the general rate of infation. If this happens there is a risk that investments which were intended to provide protection against inflation will provide less than 100% inflation (even if those assets appreciate in line with general inflation which is not a given). The second problem with using property is that the income from property is a net item: rent received less various expenses. Even if the rent increases in line with inflation, it cannot be assumed that the expenses will not increase at a higher rate (property taxes in many countries have been rising well above the rate of inflation for a number of years). In this situation, the net income from the property will not increase at the same rate as general inflation. There are of course other ways in which the performance of the investment can vary from either personal or general inflation. It is of course possible that property will perform better than general or even personal inflation, and in any case, I view property as one of the better inflation hedges available. There are (at least) two problems which arise when trying to protect against future inflation (apart from the uncertainty over how much inflation we will experience).

The first is that, in this context, inflation is a personal thing. It is quite possible that your personal rate of increase in living costs will be higher than the general rate of infation. If this happens there is a risk that investments which were intended to provide protection against inflation will provide less than 100% inflation (even if those assets appreciate in line with general inflation which is not a given).

The second problem with using property is that the income from property is a net item: rent received less various expenses. Even if the rent increases in line with inflation, it cannot be assumed that the expenses will not increase at a higher rate (property taxes in many countries have been rising well above the rate of inflation for a number of years). In this situation, the net income from the property will not increase at the same rate as general inflation.

There are of course other ways in which the performance of the investment can vary from either personal or general inflation.

It is of course possible that property will perform better than general or even personal inflation, and in any case, I view property as one of the better inflation hedges available.

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