Not intending to start another political post, but you can find more accurate measures of inflation. The CPI is a very bad measure of actual inflation, and this is by design so the government can understate it and thus borrow at lower interest rates.

Those who have conducted an honest analysis of inflation are remarkably consistent and all seem to show current inflation between 10-11%, and trending higher. That certainly seems to be much more realistic given all of the extra liquidity (money) in the system due to the QE programs. Not to mention everyone's experience with rising prices everywhere. Regardless of whether you think the stimuli were a good idea, nobody disputes the fact that they add money to the planet -- that was what they were intended to do. And that's what inflation is -- by definition.

What makes this interesting for a home owner is that you can borrow today at around 4%, and pay this loan back with money that is 10% cheaper every single year.

Policies like this (deliberately) encourage borrowing, and theoretically spending, rather than saving. So you don't want any equity or savings in this kind of environment, you want debt. The hedging strategy is to borrow as much as you can from your house (leave no equity in it), and then take whatever equity you have and invest it in non-inflating assets (either non-US dollar assets or in a commodity of some kind). For example, let's say you owned your house outright. You can borrow the whole value at 4%, then take the money and buy a Canadian municipal power company bond that yields 9%. You make a free 5% on your money with essentially no risk. And that doesn't even consider inflation. In US dollar terms, you're making about 15%. You can take the dividends from the bond and use them to pay your mortgage.

One reason this "stimulus" doesn't work that well right now is that consumers are tapped out. So nobody has any more equity or credit left to spend. Meanwhile, corporations will take some version the hedge vs. investing here where they take a 10% haircut every year from inflation. This is why "hard money" economists (also called "Austrian economists") will say that credit does not drive production, which they also say is the only way an economy grows (not from consumption).

But it doesn't matter where you fall on any of these arguments. Even if inflation were zero, you can still get a 5% nearly risk-free hedge due to the artificially low rates right now, and that means that you should carry zero equity right now.

Again, FWIW,

Jim