I am not totally talking about international interdependency. The vast majority of people now are city dwellers, and most food comes from a very far distance- along with most everything else. Something simple, like gas and diesel at 10 bucks a gallon could have some real unanticipated effects.
At $10/gal, the effect would be to switch to Liquid Natural Gas, which can be both 'mined' and artificially produced from coal (coal gasification). This fuel is equivilent to about $5/gal (in gasoline terms, equal power cars, equal driving distances). Hydrogen split from water by electrolysis is about $7/gal (in gasoline terms), its more expensive because of the difficulty in actually using it (like storing and transporting). Realise then, that we really aren't more than a decade or two away from switching to an alternative fuel (also dont forget that nuclear supplies are nearly inexhaustable).
We have so much food and grain we dont know where to put it all, we have to maintain high prices by placing high import tariffs on other nations and then turning around and paying our farmers not to grow. Grain, if kept dry and unexposed to the elements can last millenia. There are vases of sealed grain found in the tombs of egyptian kings, still good to be planted or consumed.
I'm convinced that our interconnectedness and advanced technology, makes our race almost impossible to wipe out now; INCLUDING complete nuclear war by every nation.
I believe we just acheived a net negative savings rate as well. It just seems shaky to me, admittedly I am no financial expert. Stocks are fine, bonds are fine, I would just like to have an alternate as a diversity cushion.
An economic depression is something completely different; I am convinced that serious economic hardship is coming down the pike for my generation. The money owed to SS, Medicare/Medicaid and what is required to fund the military is 3/5 of the budget. Paying just the interest on our current debt is about a fifth of our budget. But we're still bringing on the debt.
Taxes will go up,
economy will go down,
social services and military will have to be cut because banks wont trust lending our gov't a single dime after a certain debt point.
Taxes will go up again
economy will continue to slow, other people will be blamed for the economic weakness (the chinese use slave labor, and they do; the OPEC squeeze us for every dime, and they do).
inflation, inflation, inflation...
So back to the thread, how do we hedge against serious and rampant stagflation that looks to be on our horizon?
Gold, maybe, it seems like a pretty contrived currency to me but maybe thats cause I'm an engineer- Gold isnt useful for anything.
Assets? Manufacturing equipement? Farmland?
Housing will bust, manufacturing is done cheaper by China, food prices will tank
But all three of those things would provide a place to live, machinery to use, and food to eat!
IMHO, the only 'thing' to trust is God (i.e. "In God We Trust" on our money), and learn to be content in both riches and poverty for we will be provided for.
Drew