Yes, this is a risk and it makes sense. During the great depression, there were significant decreases in inflation[1]. But what am I risking? I might lose 50% of the few thousand dollars I put into silver, but it protects me against unexpected movements or a dollar crash during an unparalleled period of time in modern history. It ensures I'll have money to eat.

[1] https://inflationdata.com/articles/inflation-cpi-consumer-pr...

By all means keep little silver or gold in the case the whole society collapses or for emotional reasons. You don't have to defend it. You have to defend the argumentation you arrived into it.

The problem I had your comment was the rationalization for what you did.

When US was trying to hold to gold standard, population growth was high and the country was barely industrialized, you could expect inflation. None of the reasons that applied then apply today.

(Gold standard is similar to debt in denominated in foreign currency. It can cause out of control inflation and even hyperinflation.)

I understand there may be flaws in my logic, but what flaws were there? You basically said I was wrong and the market believes otherwise, but you didn't explain how my beliefs on the varying velocity of money wouldn't or couldn't create inflation in the next year or so.

Because increasing velocity of money is very unlikely.

https://www.treasury.gov/resource-center/data-chart-center/i...

That chart kind of proves my point though. People are moving from stocks to bonds as risk in stocks increases, yet the long-term outlook of the economy(10+ years) is largely unchanged. Despite this, the government is injecting tons of money during a time of a global quarantine that will eventually be lifted. When that lifts, people will buy a surge of supplies that they are depleting during this time, leading to a spike in demand in most things. Am I seeing this wrong?

That spike in demand will pass, and we will (we hope) settle down to a steady state. That steady state is (in the market's opinion) not much different from the steady state that we would have had without the pandemic. That's why the market is still predicting the 10-years-out state as being the same as it predicted before this crisis.

Right now they're terrified of deflation. A lockdown is going to cause a massive drop in consumption and a massive drop in wages, making a vicious circle of falling prices that could continue well past the end of quarantine. They'll be happy just to keep prices stable.

Deflation wouldn't be so bad. everyone says it is because they think people will stop buying stuff. really? will people check the CPI figures before they go to the grocery store, everytime? stop buying bread because the inflation figures say it'll be cheaper by 25c next year? will factories stop because they won't buy parts, so they can save 1% on parts? i don't think so.

people and govt's are addicted to debt, that's why they want inflation.

There may well be serious real problems, which the central bank can't magically solve. But if you're just worried that there might not be "enough" inflation, the central bank has unlimited ability to create that, if it wishes to. (Of course, whether such inflation would be a good idea is debatable, and could depend on the circumstances.)

> the central bank has unlimited ability to create that, if it wishes to.

This is not true as the recent decade shows. Japan has tried to increase inflation almost two decades.

Just increasing the money stock does not create inflation if the velocity of money decreases at the same rate.

No, Japan has not really tried to create inflation. If they had, they would have succeeded.

If the government prints lots of cash, and then mails a bunch of cash to every person in the country, then there will be inflation. Lots of inflation, if the amount of cash is high enough. And there's no limit to how high the amount can be.

To doubt that, you have to believe that someone of previously modest means who now has a million dollars of cash in hand will just horde it, rather than go out and buy the $40,000 car they've been wishing they had, or the nice $500,000 house they now could live in, or the nifty $10,000 camera and lens set that would be really fun to play with, or the...

Actually, you don't have to just believe that someone will horde immense amounts of cash rather than buy real, useful stuff with it, you have to believe that almost everyone will horde the cash.

People aren't like that.

If I remember correctly from my econ classes, deflation has a nasty spiraling effect where any currency introduced into the system is subsequently hoarded, which decreases economic activity which makes money even more valuable which increases hoarding ...

There are many tools in the toolbox for handling inflation. For deflation, not so much.

The central bank can create unlimited inflation in financial assets. In, say, food, or cars, not so much. (I mean, I guess they could buy a bunch of food and cars, but that's pretty far out there, even for the current expansive definitions of what the central banks can do.)

Isn't this what some governments (through purchasing supply) and some central banks (through relaxed lending restrictions) have done with real estate?

Yes, but real estate is at least half in the "financial assets" category.

I disagree. The sudden jump in equity prices that happened over the last few years looks to me like a classic case of the markets pricing in high future inflation.

I think it's kind of the reverse. Stocks should sell at risk-adjusted rate-of-return parity with bonds. If inflation is 1% (and is expected to stay there), then what's $1 of corporate profit worth? $100 (same as $1 of bond interest would cost). So the stock market has soared because interest rates have fallen. Money has moved into the stock market, seeking rates of return, and has continued to do so until the rate of return of stocks was not higher than the rate of return of bonds.

Bond yield is classic indicator for future inflation.

Look at Treasury yields for next 10 - 30 years. https://www.treasury.gov/resource-center/data-chart-center/i...

Huge amounts of cash has been printed and used to buy bonds over the last ten years, I don't think the bond market is a useful means of price discovery as a result.

They see decades of low inflation until they don't. The post-WWII US had a couple decades of low inflation in the 50s/60s, followed by a couple decades of high inflation in the 70s/80s. Central banks do know how to stop inflation, but there can be pressure not to in some situations.

And the depression he's worried about comes after a recovery from the current crises.

I wish I had those predictive powers.