"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. Stripped of its academic jargon, the welfare state is nothing more than a society to support a wide variety of welfare schemes. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit (debt creation)." by Allan Greenspan (#8) in The Objectivist newsletter published in 1966, reprinted in Ayn Rand's Capitalism: The Unknown Ideal.
"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." Lord John Maynard Keynes (1883-1946), renowned British economist
There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved." - Ludwig von Mises, in Human Action, Regnery, 1966, p. 572.
"Beware the leader who bangs the drums of war in order to whip the citizenry into a patriotic fervor, for patriotism is indeed a double-edged sword. It both emboldens the blood, just as it narrows the mind. And when the drums of war have reached a fever pitch and the blood boils with hate and the mind has closed, the leader will have no need in seizing the rights of the citizenry. Rather, the citizenry, infused with fear and blinded with patriotism, will offer up all of their rights unto the leader, and gladly so. How do I know? For this is what I have done! And I am Caesar."
Those who do not take an interest in public affairs are doomed to be ruled by evil men" - PLATO - 300 B.C.
"All truth passes through 3 phases: First, it is ridiculed. Second, it is violently opposed, and Third, it is accepted as self-evident." - Arthur Schopenhauer 1788-1860.
In an effort to light a candle against the darkness of currency devaluation, here are a couple thoughts. I'd appreciate your comments.
(1) VGPMX is Vanguard's precious metal stock fund. The holdings are 88% overseas. Entry minimum is high at $10,000 min. Great no-load fund family. The money management is done by a British firm, as I recall. The hedge against devaluation is both the precious metals business and the high non-US dollar denominated equity at 88%. Canadian and Australian companies lead the holdings. I personally own this.
(2) BEGBX is an International bond fund operated by American Century in Kansas City (good ribs). The money is actually managed by JP Morgan. No load of course. The investments are in the government bonds of foreign countries like Germany, Japan, and France(yuck). The fund explicity does not hedge more than 25% of its portfolio, meaning more upside as the dollar falls. (Any comments on whether this is right or not?) Yield is over 7%, so you get good interest return along with the exchange return. I own this fund.
(3) DODFX a no load stock fund with 80% of assets overseas in at least three countries. Again, a currency hedge. Run by Dodge and Cox in San Francisco. Value oriented, low holdings turnover. Good return. I own this fund.
Clearly, these investments carry risk (3-year beta's for VGPMX, BEGBX, and DODFX are 0.69, 1.51, and 1.20). Portfolio allocation for foreign assets is another big question. Do you go more than the traditional 10%? How about 20 to 30%?
Another question to open is how do you handle your mortgage now, given what interest rate increases will soften demand for housing and will complicate the net present value of your payment stream.