Yes we can. The nature of fiat money is to create inflation. Its even an explicit policy of the federal reserve. We can rule it out, and worrying about it results in strictly sub-optimal investment choices.Saying it does not prevent it. While I agree a lot can be done to avoid deflation, we cannot rule out that deflation can happen for a prolonged period. Regardless, it is certainly possible for prolonged low inflation; that is enough to mess up rate expectations and economic growth. The only difference here between the two currencies is the long-term inflation target.
Deflation isn't going to happen, simple as that. The US has never had deflation since it left the Gold standard. The only time deflation would tend to happen is a recession but since the response to a recession is to print money deflation doesn't happen.
Inflation being below projected is not deflation, that is still Inflation.
Back to holding a mortgage and not buying any bonds. Asymmetric bets are not always a good bet to make; I would not generally recommend shorting stocks or commodities, so why should I short long-term rates as a general recommendation?
Its not an asymmetric bet, because the underlying factor is itself asymmetric. Its not like betting on the market going up or down (it can do either for long periods). Its more akin to betting on the sun rising tomorrow.
You are not shorting long term rates. Shorting involves borrowing a security betting that the price will drop. If it goes up you loose. You are borrowing dollars, with a promise to repay later, knowing that the value of those dollars will be lower. It does not matter if its actually 1% lower or 10% lower, either way you have still won by giving back something worth less than you were given.
Statistics: Posted by rogue_economist — Wed Feb 05, 2025 8:47 pm