The US government needs new and sustainable sources of cash now that foregin countries like China, Japan, etc are moving away from funding the quagmire of debt our government has spent itself in to.
Treasury Inflation Protective Securities(TIPS for short) is an investment vehicle for individuals to slip into that will shield them from the inevitable inflation that will rear its ugly head in the coming years with the unreal amount of debt that is being printed by the US Government.
TIPS is capturing money that is being poured into other inflation proof vehicles like precious metals such as gold and silver, land, REITs. These securities pay interest twice a year. This would be a great idea if anyone but our government was doing it. The premise is superb. The catch is simple. The US government will print more money everytime the rent comes due on these securities just like it does with savings bonds, and other treasuries that come due quite often.
Our government believes that by offering investors inflation safe securities like TIPS will cause them to evacuate their metals positions and return to securities that are safe from inflation and will pay a steady rate of interest regardless what the markets do.
As usual, the government is putting off the inevitable for a few more feet of breathing room. With 100 trillion dollars of unfunded liabilities, TIPS will not be the financial answer to our funding problems, it will only be a blip on the radar in the grand scheme of things to come.
People who need protection from future inflationary pressures that are beginning to build across the land should seriously look into the TIPS and the advantages and disadvantages of owning TIP securities.
When your securities come due, don’t worry, your money is safe as long as we don’t run out of ink.
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