Ready for What?

Got some revelation put into your hands
Save you from your misery like rain across the land
Don't you see the color of deception
Turnin' your world around again
--INXS

Perhaps the most common argument for gold is that it serves as a hedge against inflation. And, according to many gold bulls, people seem unprepared for inflation, judging by the small fraction of investors that have positions in precious metals.

While it is certainly true that few people own gold, it is possible that people have been positioning for inflation in other ways for some time. For example, the trend over the past 20+ yrs is for people to hold less cash and more debt. Such positioning is good in inflationary environments. Inflation gnaws at the value of cash. And debtors pay back creditors in devalued dollars.

Indeed, it could be argued that people have been responding smartly to a secular wave of inflation (appropriately defined as an expansion in money and credit) over the past couple of decades.

Seems to me that people are way less positioned for the opposite: deflation: where cash and zero debt rule the day.

position in gold