Bananas, Corn, and Inflation
In a recent article in Barron's, the columnist Thomas Donlan asks "Which is a better store of value, bananas or corn?" He rightfully concludes that corn is superior. Bananas go from green, to yellow, to black in short order -- they become worthless rather quickly. Corn, on the other hand, can be stored for long periods of time if the kernels are properly handled.
In these less agrarian times, we store our wealth in dollars (unless you're hoarding gold bars or barrels of oil in your back yard). Dollars tend not to decay, but they can lose their value via inflation. Inflation eats away at money by reducing the value of its purchasing power.
Concern over inflation has begun to rise as the government prints more money and increases spending in order to spur a recovery. But there are reasons to believe that inflation is not lurking around the corner. The excess capacity in production and the labor force, as well as the need for everyone to dig themselves out of debt, act to limit potential inflation in the near term.
For a more detailed take on my views on the potential for higher inflation, please see my blog post entitled "Risks of Inflation" below.
Words of Wisdom
Barron's on new Yankee Stadium: $6 hot dogs, $9 beers, $2,625 box seats. I'm moving to the Bronx. There's obviously no recession there.