Off the Gold Standard VS Helicopter Money: Portfolio Returns Inside
"a money-financed tax cut is essentially equivalent to Milton Friedman's famous 'helicopter drop' of money". Bernanke 2008
In the 1970s, inflation spiraled out of control after Nixon took the U.S. off the gold standard in 1971. What many forget is that inflation didn't rise in a straight line—it fluctuated. At one point, the Fed believed they had solved the problem and lowered interest rates, but inflation surged back soon after. Investors could have protected their wealth by understanding what this cycle meant to the positions that they were holding. More importantly, they could have learned what to invest in and how it would have outperformed inflation.
It feels like we’re repeating history.
(I heard some of you had trouble accessing the charts from my recent presentation. Don’t worry, I’ll be sharing the updated version with you once we finish editing it.)
But here’s the thing, none of this is new for my subscribers! You already know that I’m currently investing in bonds. However, I don’t think this trade will last long. Why? Because I believe inflation is going to come back strong as interest rates are cut.
Below are some key charts from my presentation on inflation and the 40-year bond cycle that explain why most investors are not ready for it.
It looks like the Fed will get behind the curve again.