Defusing the Inflation Time Bomb

The intent of “The Inflation Time Bomb” was to point out that long-term investment planning that focuses only on dollars and income, while ignoring purchasing power and assets, can be a trap. Dollars must be adjusted for inflation to get purchasing power, and incomes must be adjusted for the loss of purchasing power. Without these adjustments, assets will be depleted and so will income. The problems that arise from neglecting to make these adjustments have come to the fore over the last 30 years as inflation created large differences between nominal and real interest rates.

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