Speculate: What will happen w/TIPS?

[EddieG]

Even sensible people like Jim Puplava recommend TIPS. Let's say we start seeing very high price inflation... What do you think will happen with the inflation-protected securities? Peter Schiff is right that TIPS are a case of the fox guarding the henhouse (i.e. the gov't manipulates the CPI to keep it under the real rate of inflation), but over and above that it seems that if inflation gets high enough, wouldn't the gov't just flat out default on paying anything on these, or can they call them?

If TIPS reached say a 15% yield it seems like the gov't would default (even using its bogus CPI measures) well before a long bond at 3%. Is this another case of an investment that will be worthless when it's needed most? I guess I just don't trust any arrangement where the gov't is the counterparty, especially a broke gov't.

 

[ChooseLiberty]

Oil and food prices are excluded from gov't inflation calculations currently.

So the very things you're probably trying to hedge against aren't included.

They might be better than a lot of things, but the feds will still F U in the end.

Or they might even change the calculations again. AFAIK TIPS don't specifiy how the inflation is calculated, they just use the fed benchmark. Which you can tell is BS.

 

[MrNick]

The government will just change the rules once they don't like the way things are going. They'll do everything they can to lower the CPI so their inflation will always be lower then real inflation.