2017, or 2018, or 2019 . . . But Higher Conviction than Ever . . .

More than ever before, I am convinced that a period of currency-debasement inflation is upon us. There are a few principal possible upcoming catalysts to my view on currency-based inflation turning into a consensus view. First, if President-elect Trump's first budget proposal in February is as aggressive on Keynesian spending initiatives on infrastructure and on public works, in combination with tax cuts that are unaffordable for the United States, then the strength and stability of the U.S. dollar likely comes into question. Unlike the United States balance sheet that Ronald Reagan inherited, when United States debt-to-GDP was well below 50%, the President-elect will inherit a balance sheet at more than 110% and normalized debt service expense (normalized for 4.5% interest expense over the long term) at $900 billion or roughly 25% of annual tax receipts. These statistics suggest that the optimism about the stimulative impacts of deficit spending under the upcoming administration in comparison to the impacts in the Reagan administrative may not be as valid as the 10% upward move (since the election) in the equity markets suggests. Second, to label China is a wild card is an understatement. Chinese central banking actions have been consistently erratic. For example, tighter credit lending policies have been followed by capital injections into Chinese banks, only to be followed by more regulatory actions to limit malinvestment of bank capital. This pattern of erratic actions is similar to the erratic series of events prior to the 2008-2009 financial crisis. However, in contrast to the relative transparency of the actions of the U.S. Treasury and Federal Reserve System, the Chinese Central Bank likely will act more covertly, if past is prologue. I sleep better knowing that my largest investment holding is real property in the form of homes. I also have more peace of mind owning my second largest investment, precious metals. When these holdings will outperform other investments will depend on when the consensus opinion on currency-debasement inflation materializes. I am very happy to wait patietly.