I could well be wrong, but my thinking is that one should have a significant portion of ones wealth in cash, so long as it is government guaranteed. That may mean having accounts in a number of banks to benefit from the $250k per account guarantee. The interest rate one can get is enough to compensate for the reported inflation level (especially if it is held via a SMSF which is taxed concessionally).
I do not like most govt bonds (especially anything over 2 years), except short term bonds issued by the Australian govt. Bonds issued by top gobal corporations may be safer than Italian govt bonds.
One of the oddities I reported on here some weeks ago was that Japan was a net exporter of gold. From memory I think they sold 70 tonnes of gold in a quarter. I ask myself why the Japanese household would do this? I know that it was partly due to the higher price of gold in USDs. It could also be due to dissaving by an aging population. However it may mean that they do not expect inflation (on the basis of their last 20 year history of low deflation). Gold has no virue in a deflation, unless the government gurantees its price (like the US did in the 1930s).
Will the US and Europe go Japanese over the next few years? What would higher interest rates on Japanese bonds mean for economic activity there. What would higher interest rates on govt bonds in Europe and US mean for economic activity there if govts are unable to borrow at cheap rates?
However, governments CBs are effectively printing on behalf of governments to take up their bonds. That may keep interest rates low for a long time. The largest holder of Treasuries is the Fed., not China.
