How do I hedge properly against inflation and other currency risks?

Question

What is the best way to split individual investments between commodities and individual currencies? Is there an advantage to investing in commodity money and if so, what percentage of your personal finances should you spend amassing in commodities?

Answer 1

I apply what you term 'money' to the word 'commodity'. And I agree with littleadv, you are just selling us your perspective on (such things as) precious metals.

What I want you to think about is these truths:

• You cannot eat gold
• Gold pays no dividend
• It is extremely difficult to spend gold
• Gold earns no profit by action
• All currency is fiat money, even gold. All currency has (spendable) value only because we agree that it has that value.

When used as currency gold just has two values: utility value and currency value. I hold it is better to separate the two.

There is not enough gold in the earth to represent the value in aggregate economies of the world. Trying to go back to the gold standard would only induce an unimaginable hyperinflation in gold.

Recent years shows that gold does not retain value. See the linked chart.