Commodities

This is the eighteenth post in a series entitled Currency, Money and the Economy.

While we are talking about hard assets, how about investing in commodities such as oil, steel, and agriculture? Commodities are hard assets and have values associated with them. However, their value is derived from their perceived importance in the world at a particular time. For example, oil is used in everything from fuel to plastics. Therefore, a barrel of oil has value today. However, if the world develops alternative forms of energy, such as solar power and bio fuels, then the importance of oil will diminish, and so will its value. Gold and silver do not have to do anything but glitter to have value.

That being said, investing in commodities is prudent because they are still hard assets and will not suffer as badly as paper assets in an economic disaster scenario. However, you should invest in commodities that will have a high priority in a deflationary or inflationary environment. Food and energy (traditional or clean) would be two such commodities. Not coincidentally, those are the two commodities that the US government likes to either manipulate or omit when reporting inflation numbers today.