The Trouble With TIPS
James Grant examines a crucial problem with Treasury Inflation Protected Securities: they don't necessarily protect against inflation!
Grant writes:
Inflation, after all, is a matter of dollars--an increase in the supply of money not offset by an increase in the demand for money. People will say, "Inflation is too much money chasing too few goods," but there's a lot besides goods that too much money can chase: stocks, bonds, houses, foreign currencies, etc. The cause of inflation is always the same, yet the symptoms are ever changing, and TIPS protect against only one set of symptoms. link
