The fear of inflation is causing a lot of financial advisers to recommend TIPS. Those are government bonds that guarantee a small interest added to the inflation rate. That sounds good, but I see a flaw in the plan. Suppose that inflation goes up to 10% as it did under Carter. The yield would be 12%. But, the marginal rate on income tax is 39%. So the net yield after taxes is 7.3%. But, inflation is 10%, so the bond owner loses 4.7%. That is better than owning the regular treasury bond paying, say 4%. After taxes the owner would lose a whopping 9.1% considering inflation. TIPS look like a smart move for the government especially if they are planning on inducing a high inflation rate. (Democrats like inflation; they like paying off debt with cheap dollars. If the inflation rate under Bush had been 6%, then the recent credit crunch would not have been so severe since home values would have continued to rise. But eventually rising interest rates would have bitten those with ARMs, but the crash would have been delayed until a Democrat was President. Republicans are not good long run strategists like the Democrats.)