The Biden Administration is providing the biggest positive stimulus to demand since WWII, and at the same time doing everything it can to suppress supply. Higher [unemployment insurance] benefits, closed schools (which keep one parent at home), and promised corporate tax hikes practically guarantee that supply can not keep up with demand. It is a recipe for an inflation shock we have not seen in the U.S. in a generation.
Kevin Hassett
It has been a decade since I last wrote about inflation. Now the U.S. government and the Federal Reserve seem to be doing everything possible to spark dollar inflation.
Is this bad? Yes if: (a) you hold U.S. dollars, or (b) you have to pay capital gains taxes in U.S. dollars. Not so much if: you owe debts denominated in U.S. dollars.
What can you do to protect against inflation? Financial securities price in inflation faster than you can (e.g., TIPS give negative yields, commodity futures enter contango), so by the time “inflation” is in the news you can’t generally buy a direct, liquid, inflation hedge in the markets. Buying and holding useful commodities is a hedge against inflation. Real estate is a useful quasi-commodity. Unfortunately real estate prices are, if anything, leading inflation in the last year. But if you already own your primary residence there’s one thing you can and should do: Mortgage your home to the limit. The government actually subsidizes mortgages (offering credit guarantees for some, and offering a tax credit for mortgage interest). Mortgage loan rates are at historic lows – basically equal to inflation on an after-tax basis. And here’s the clincher: Mortgages are dollar-denominated debt – the one thing that comes out ahead in a dollar inflation scenario.
The other subsidized government investment is the inflation-protected I bond. It’s more of a savings vehicle, and I bond purchases are limited to $10,000 per year per person.
Federalist 