Where should I park my money if I'm pessimistic about the economy and I think there will be high inflation?
"For diversification against local currency's inflation, you have fundamentally 3 options: Depending on how sure you are on your prediction, and what amount of money you're willing to bet to ""short the country"", you might also consider a mix of approaches from the above. Good luck." "If you think your cash will buy fewer goods in the future due to inflation, are there goods you will want or need in the future that you can purchase now? I think the cost of storage would need to be less than the inflation in price for this to make sense. If you used commodity trading there may not actually be a storage cost but likely some fees involved that would need to be weighed against the expected inflation. Basically if ""things"" are going to cost more in the future, making your cash worth less, can you convert cash into ""things"" before prices escalate?" Given those assumptions (which I happen to think are reasonable) it seems to me the obvious place is to buy non-Australian assets, such as the Vanguard VTS (total US share market) and VEU (world ex-US) ETFs, and perhaps also some international fixed-interest ETFs.   I think keeping a certain amount of cash would be prudent anyhow. If you felt very sure this was going to happen, you could borrow in Australia and buy foreign assets, expecting that as the AUD falls, the relative cost of the borrowing will also fall.  This is obviously fairly risky, not least because Australian interest rates are already high and may go much higher, and while the rates go up the exchange rate will also likely go up. As I mentioned on another answer, I think buying gold or other commodity instruments is a poor choice here because the Australian economy and the AUD is so tied to those prices already. Taking into account your POV I would recommend mostly goods that will be harder to obtain, precious metals (not only gold) and forex (although the forex aproach depends on some other country not having troubles with it's own economy which in a world as interconnected as ours by internet and all the new technologies doesn't seem likely)  i highly recommend silver which is cheaper than gold and is stable enough in the long term Typically in a developed / developing economy if there is high overall inflation, then it means everything will rise including property/real estate. The cost of funds is low [too much money chasing too few goods causes inflation] which means more companies borrow money cheaply and more business florish and hence the stock market should also go up.   So if you are looking at a situation where industry is doing badly and the inflation is high, then it means there are larger issues. The best bet would be Gold and parking the funds into other currency. Apart from some of the excellent things others say, you could borrow money in AUD and invest that in another currency (that's risky but interesting) if the AUD interest rate is low and the other countries interest rate is higher, you'll eventually win. Also, look at what John Paulson did in 2007, 2008... I wish I'd thought of that when I was in your position (predicting a housing crisis) The best investment is always in yourself and increasing your usable skills. If you invest the money in expanding your skills, it won't matter what the economy does, you will always be useful.
"The markets now are projecting inflation over the next 10 years of only [1.19 percent](http://www.clevelandfed.org/research/data/inflation_expectations/). That's the lowest since the deflation that drove the Great Depression.  And prices just **fell** [in May](http://tucsoncitizen.com/usa-today-news/2012/06/14/consumer-prices-fall-0-3-in-may/), *deflation* once again.  The last time before this that prices *fell* was the last half of 2008 -- the start of the Great Recession.  So we have prices **falling** again, and the last time two times we had unexpected significant price falls they gave us the Great Depression and Great Recession.  Anyone who is actually afraid of inflation today is somewhere between being totally out of touch with reality and being an obsessive loon.  &gt;So just help me figure out why there are economic arguments against purposefully high inflation (5%)  You *don't* want ""purposely high inflation"".  One party's gain with that is just another party's loss.  However we are eons away from that, for better or worse.  But what we ***really don't want*** -- with deflation pressing all around us again, creating a real need for monetary (not fiscal) stimulus to prevent the third ""Great"" bad thing -- is inflation paranoids running around trying to stop it screaming ""Weimar! Zimbabwe!  We're about to turn into another Weimar / Zimbabwe!""  Paranoia about inflation is absolutely destructive in this economy.   Yet, [Conservatives prefer socialism to 3% inflation](http://www.themoneyillusion.com/?p=14918), forgetting everything Milton Friedman taught them.  Alas, it's true." Technically, you could improve your odds in this hypothetical pre-apocolyptic economy by diversifying your digital and tangible precious-metal-commodity portfolio by going in with gold, silver, platinum, palladium, and others.   That being said I'm not sure if one can access tangible stores of all these metals... First question:  Any, probably all, of the above. Second question:  The risk is that the currency will become worth less, or even worthless.  Most will resort to the printing press (inflation) which will tank the currency's purchasing power.  A different currency will have the same problem, but possibly less so than yours.  Real estate is a good deal.  So are eggs, if you were to ask a Weimar Germany farmer.  People will always need food and shelter. The below assessment is for primary residences as opposed to income properties. The truth is that with the exception of a housing bubble, the value of a house might outpace inflation by one or two percent.  According to the US Census, the price of a new home per square foot only went up 4.42% between 1963 and 2008, where as inflation was 4.4%.  Since home sizes increased, the price of a new home overall outpaced inflation by 1% at 5.4% (source).  According to Case-Shiller, inflation adjusted prices increased a measly .4% from 1890-2004 (see graph here). On the other hand your down payment money and the interest towards owning that home might be in a mutual fund earning you north of eight percent.  If you don't put down enough of a down payment to avoid PMI, you'll be literally throwing away money to get yourself in a home that could also be making money. Upgrades to your home that increase its value - unless you have crazy do-it-yourself skills and get good deals on the materials - usually don't return 100% on an investment.  The best tend to be around 80%. On top of the fact that your money is going towards an asset that isn't giving you much of a return, a house has costs that a rental simply doesn't have (or rather, it does have them, but they are wrapped into your rent) - closing costs as a buyer, realtor fees and closing costs as a seller, maintenance costs, and constantly escalating property taxes are examples of things that renters deal with only in an indirect sense. NYT columnist David Leonhart says all this more eloquently than I ever could in: There's an interactive calculator at the NYT that helps you apply Leonhart's criteria to your own area. None of this is to say that home ownership is a bad decision for all people at all times.  I'm looking to buy myself, but I'm not buying as an investment.  For example, I would never think that it was OK to stop funding my retirement because my house will eventually fund it for me.  Instead I'm buying because home ownership brings other values than money that a rental apartment would never give me and a rental home would cost more than the same home purchase (given 10 years). I was asking myself the exact same thing.  And i have come to the conclusion that most of your money should be invested, In index etfs and maybe some bond etfs too.  If Inflation is about 2% and the interest you make in a savings account is less than 1%.  Your actually loosing money in a savings account.  Keep a few thousand bucks in your savings account and the majority invested and working for you. Two ideas. EDIT: you should also do alot of research about how to invest this money properly. Something low risk but will beat inflation by a margin. But has inflation went up ? The only reason jobs would be lost would be if the cities economy couldn't absorb the inflation .  Since you are now increasing the incomes of every one at the bottom , the city will likely be able to absorb the inflation . The question really is have the people at the bottom increased there spending power over all  and have there been winners and losers for example maybe servers are doing better but retirees and others on a fixed income worse . Inflation is basically this:  Over time, prices go up! I will now address the 3 points you have listed. Suppose over a period of 10 years, prices have doubled.  Now suppose 10 years ago I earned $100 and bought a nice pair of shoes.  Now today because prices have doubled I would have to earn $200 in order to afford the same pair of shoes.  Thus if I want to compare my earnings this year to 10 years ago, I will need to adjust for the price of goods going up.  That is, I could say that my $100 earnings 10 years ago is the same as having earned $200 today, or alternatively I could say that my earnings of $200 today is equivalent to having earned $100 10 years ago. This is a difficult question because a car is a depreciating asset, which means the real value of the car will go down in value over time. Let us suppose that inflation doesn't exist and the car you bought for $100 today will depreciate to $90 after 1 year (a 10% depreciation). But because inflation does exist, and all prices will be 0.5% higher in 1 years time, we can calculate the true selling price of the car 1 in year as follows: 0.5% of $90 = 0.005*90 = $0.45 Therefore the car will be $90 + $0.45 = $90.45 in 1 years time. If inflation is low, then the repayments do not get much easier to pay back over time because wages have not risen by as much.  Similarly the value of your underlying asset will not increase in value by as much. However as compensation, the interest rates on loans are usually lower when inflation is lower. Therefore generally it is better to get a loan in times of high inflation rather than low inflation, however it really depends on how the much the interest rates are relative to the inflation rate. The problem with a little bit of deflation is that it can turn into a lot of deflation very quickly.  That id the risk of the so-called liquidity trap.  a place where the Fed truly does lose its power and depressions become possible.  The US housing market is in a secular depression.  People aren't buying despite record low rates because they assume the house will be cheaper next year.  Now imagine that across the entire economy.  The longer you wait the cheaper things get.  It *sounds* groovy but the problem is that it isn't just you waiting...it is everyone waiting, all at the same time.  So the economy, such as it is, grinds to a halt and jobs vanish and things get even cheaper.  It is a cycle that is extremely costly to get out of.  The last time we fell into a depression it took massive new government spending programs plus a world war to fully pull us out of it.  Some people might make the argument that you need a good long depression every now and then.  They may say that, in fact, the Great Depression was the catalyst for policies that set America up for 70 years of solid economic growth.  I'm not so sure.  I do look at our current situation with bailed out zombie banks and I have to wonder if just letting them all fail may have been better even though the short term pain would have been severe.  We'll probably know in about 5 years if they did the right thing. Well, there are also cases where inflation actually helps you, individually, as a consumer. For example, if you have a mortgage or any other debt, debtors benefit from the value of a dollar today decreasing tomorrow.  In a very general sense, psychologically you want to avoid deflationary periods as well as it tends to seize up an economy (why would I spend a dollar today if it will be worth more tomorrow?).  Sure, the absolute value of a dollar decreases over time, but this is intentionally designed to diminish the value of hoarding cash today. Standard income should rise approximately with the rate of inflation, so from an absolute purchasing power standpoint you should remain approximately neutral. If the US economy crashes at all suddenly, the global economy goes with it. In that case, yes, the postapocalyptic scenarios may be the best answer. But that's got so low a probability of happening that you'd be a fool to invest in it. If you really feel the need, consider investing in the companies which supply those activities. The big winners in the California gold rush were the general stores that sold supplies to the speculators. I would put this money to a high-interest savings account. It will not earn you too much, but it will save it from inflation. Being in the same situation, and considering that money doesn't need to be available until 2025, I just buy stocks. I plan to progressively switch to safer options as time passes. It depends on your goals. Without knowing more than the fact that you live in Mexico (and therefore presumably have future expenses in pesos) and that you are concerned about the purchasing power of pesos, I would suggest an inflation-linked peso-denominated investment, if one is offered. Some highly pessimistic things worth noting to go alongside all the stability and tax break upside that homes generally provide: Negative equity is no joke and basically the only thing that bankrupts the middle classes consistently en masse. The UK is at the end of a huge housing bull run where rents are extremely cheap relative to buying (often in the 1% range within the M25), Brexit is looming and interest rates could well sky rocket with inflation. Borrowing ~500k to buy a highly illiquid asset you might have to fire sale in case of emergency/job loss etc for 300k in a few years when lots of (relatively) cheap rental housing is available to rent risk free, could be argued to be a highly lopsided and dangerous bet vs the alternatives. Locking in 'preferential' mortgage rates can be a huge trap: low interest rates generally increase asset values. If/when they rise, assets fall in value as the demand shrinks, making you highly exposed to huge losses if you need to sell before it is paid off. In the case of housing this can be exceptionally vicious as the liquidity dramatically dries up during falls, meaning fire sales become much more severe than they are for more liquid assets like stock.  Weirdly and unlike most products, people tend to buy the very best house they can get leverage for, rather than work out what they need/want and finding the best value equivalent. If a bank will lend you £20 a day to buy lunch, and you can just afford to pay it, do you hunt out the very best £20 lunch you can every day, or do you make some solid compromises so you can save money for other things etc? You seem to be hunting very close to the absolute peak amount you can spend on these numbers. Related to above, at that level of mortgage/salary you have very little margin for error if either of you lose jobs etc.  Houses are much more expensive to maintain/trade than most people think. You spend ~2-5% every time you buy and sell, and you can easily spend 2-20k+ a year depending what happens just keeping the thing watertight, paid for, liveable and staying up. You need to factor this in and be pessimistic when you do.  Most people don't factor in these costs to the apparent 'index' rise in house values and what they expect to sell for in x years. In reality no buy and hold investor can ever realise even close to the quoted house price returns as they are basically stocks you have to pay 5% each time you buy or sell and then 1-20% percent a year to own - they have to rise dramatically over time for you to even break even after all the costs.  In general you should buy homes to make memories, not money, and to buy them at prices that don't cause you sleepless nights in case of disasters.