Sure, some might argue that inflation indexed bonds offer a better and more direct inflation hedge than gold. But gold bugs are right to worry about whether the government will honor its commitments under more extreme circumstances.

Of course, investors who don t want to tie up their funds in low yielding government bonds can buy explicit inflation hedges as an overlay to their other investments.

The Promise and Peril of Macroprudential Policy

In addition, prudential regulations have lagged behind.

Investors, of course, are hedging their bets.

I will conclude my statement with a reference to a legal concept that needs to be strengthened the precautionary principle.

The precautionary principle and the ecosystem approach are fundamental to the conservation and management of fishing resources.

After all, steel companies have an inherent need to hedge against fluctuations in the price of iron ore, just as airlines and utilities have an inherent need to hedge against fluctuations in the price of oil.

There are anecdotes about individual hedge fund managers moving to Geneva.

Of course, a good hedge lasts only as long as such correlations persist.

(v) Precaution, as further elaborated and defined in multilateral chemicals and wastes conventions and agreements

First, it is one of the few insider trading cases ever to be brought against a professional hedge fund manager.

Ideally from their point of view they will bulk up without attracting regulatory scrutiny, i.e., no ex ante limits on their risk taking activities will be imposed.

A sensible approach could be to hedge against intermediate level shocks.

By contrast, inflation hawks argue that inflation must be attacked preemptively. While most central banks are inflation hawks, this stance is a matter of religion, not economic science.

The insider trading trial of Raj Rajaratnam, a billionaire hedge fund manager, has now begun.

China s Inflation Muddle

But the friction of normal life usually creates ambiguities that cannot be fully met in advance.

Nevertheless, it will be difficult for legitimate hedge fund managers to remove the taint that rogue traders have now spread over their industry.

The Inflation Puzzle

The Bogey of Inflation

In Vietnam, it is even higher and is expected to approach 18.2 this year, and in India it is 5.8 . By contrast, US inflation stands at 3 .

The loose monetary policies of the early 1990s pushed inflation to hyperinflationary levels.

And if you are really worried about that, gold might indeed be the most reliable hedge.

But sane people would rather avoid inflation.

If not, policymakers will eventually face an ugly tradeoff kill the recovery to avoid risky bubbles, or go for growth at the risk of fueling the next financial crisis.

And core inflation measures show no sign of accelerating inflation either.

With good communication policy, inflation expectations can be contained, and inflation can be brought down as quickly as necessary.

For this far right fringe, gold is the only hedge against the risk posed by the government s conspiracy to expropriate private wealth.

The 4 Non Solution

An Inflation Reality Check

Inflation Comes to China

Inflation is Now the Lesser Evil

Inflation or Deflation?

Is Inflation Returning?

The Ghost of Inflation Future

Inflation is under control.

During the low inflation era, which dates from the early 1990 s, developed country annual inflation rates averaged 2.4 . Central bank inflation targets are now normally set at 2 .

That expected inflation rate is consistent with the difference in interest rates between ordinary US government bonds and Treasury Inflation Protected Securities.

Higher rates would have meant lower inflation, so that inflationary expectations would not be the issue they have become.

By being more pro active, the Chinese might have been able to influence the policies that ultimately come from the American side.

The Volcker rule, whereby commercial banks would be barred from trading on their own account, and from owning hedge funds and private equity firms, languishes in Congress.

This means that SWFs, the avatars of state capitalism, are now twice as rich as the world s hedge funds, the totems of liberal capitalism s excesses.

Beyond Inflation Targets

Asia s Inflation Trap