Inflation is a simple topic, in that the basic concepts are something that everyone can understand. However, inflation is not a simplistic topic. The composition of inflation and what the different inflation measures try to represent cannot be summarised with a single line on a chart or a casual reference to a solitary data point. Investors very often fail to understand the detail behind inflation, and end up making bad investment decisions as a result.
The Truth About Inflation does not set out to forecast inflation, but to help improve its understanding, so that investors can make better decisions to achieve the real returns that they need. Starting with a summary of long history of inflation, the drivers of price change are considered. Many of the "urban myths" that have built up about inflation are shown to be a consequence of irrational judgement or political scaremongering. Some behaviour, like the unhealthy veneration of gold as a means of inflation protection, is shown to be the result of historical accident. In the modern era of lower nominal investment returns, inflation inequality (whereby some groups experience persistently higher inflation than others) is a very important consideration.
This book sets out the realities of price changes in the modern investing environment, without using economic equations or jargon. It gives investors the framework they need to think about inflation and how to protect themselves against it, whether the aggregate inflation of the future rises or falls from current levels.
Most Helpful Customer Reviews
I learned much from this book; i constantly review! Economics is one of my hobbies, plus this book is one of the best. Thank you Mr Donovan for writing this book. It was a little on the expensive side but well worth the purchase. Mr Donovan is an original thinker and he explains inflation quite eloquently. He explains how gold prices relate [actually do not relate at all] to inflation and Mr Donovan is quite convincing. Mr Donovan points out how gold has no intrinsic value at all, and here also, he is persuasive.
I was excited to get this book. ... When I did finally get it ... I thought it was ok but not great. I've managed to read only parts of the book so far, and can't bring myself to finishing it. When I like -- or dislike -- the thinking in a book, I will take time to mark up the book if I consider it an important subject.... This book has the potential to be important, but it is a slow read. I can't say more at this time except that: Get this book if you are a mainstream believer in Keynesian economics (and many are) and you are taking an economics class on related subjects or this is a core subject for you.
(3 of 5 stars is certainly not a terrible rating from me...I've seen far worse. And this is a "fair" read)
This book aims to give the reader a deeper appreciation of what inflation is and dispel the most prevalent myths about it.
Chapter 1 examines the difference between relative price changes and changes to the overall prices level. It also introduces different inflation indices and discusses why deflation is worse than inflation. Ch2 lightly surveys the history of inflation from Babylonian times to modern times. The main message is that inflation has been with us for a long time. Ch3 seeks to dispel myths that gold has intrinsic value, that it has been used as currency for millennia and that it hedges inflation. It makes the point that a gold system introduces the same inflation uncertainty in the short/medium run with a deflationary bias because supply doesn’t grow fast enough for demand. Ch4 goes deeper into the composition of CPI, touching on the issues of housing being both an asset and a necessity and food/energy being so volatile. It also points out...
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