Many knowledgeable economists and financial experts believe hyperinflation will result from all the money printing and soverign debt issues in the US. Personally I have no idea if hyperinflation will occur. I'm rather doubtful, however, since so many smart people have come to that conclusion, I must conclude there is a nonzero possibility of it happening. Will TIPS protect your portfolio from hyperinflation?
NO!! Think about it. TIPS are adjusted twice each year to reflect changes in the inflation rate. That does you no good if inflation is running out of control. What you need is an asset that adjusts with hyperinflation IN REAL TIME. Gold does that, TIPS don't. Besides, would you really trust an insolvent government to honor the TIPS committments anyway in the midst of a hyperinflationary event? Bottom line - TIPS will quickly become worthless if hyperinflation hits.
I posted this on the Bogleheads forum some time back. I doubt any of the readers there comprehend this simple fact. Having a non-gold portfolio is a matter of religeous doctrine for too many of these Bogleheads. ""Gee, John Bogle and Rick Ferri say I shouldn't own gold, so there." These people don't grasp that they are gambling their entire life savings big time and could be wiped if the Black Swan flies overhead.
Side note: My post on the Bogleheads forum was locked by Taylor Larimore (a guy I previously had a lot of respect for) because my post was "too political." WTF?!?! How in the world could posting about TIPS shortfalls be political in any sense? Weird.
