A lot of people confuse money and wealth. They think that because they have a lot of money they’re wealthy. Well, in the short run, that may be true but in the longer run, the money can go away. Wealth, however, is something that prevails.
Warren Buffett’s a guy who’s dumping paper money and getting into hard assets in the form of transportation and energy in particular. The dollar could go to zero and it has no effect on him.
The other example are the Chinese. The Chinese have spent the last five years acquiring approximately 3,000-4,000 tons of gold…They’ve got $4 trillion in reserves which is nearly all denominated in U.S. Treasury bonds and they can’t dump those paper assets….but if we inflate the dollar, which we’re trying to do, and the value of those bonds goes down in real terms, we have inflation and that’s a wealth transfer from them to us.
By acquiring thousands of tons of gold they now have a hedge position…where they win in either case. If the dollar is strong they might not make very much on the gold, but they’ll collect the value of their bonds.
I would say look at China buying gold and look at Warren Buffett buying hard assets in energy and that will give you some guidance.
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