Finding a Hedge for a Phantom

Is a nasty inflation brewing or is the U.S. facing a prolonged deflationary period similar to what Japan has experienced for the past twenty years?

Billions of dollars and major public policy decisions are currently positioned for both scenarios.

The need for further deficit spending and low interest rates is advocated by Paul Krugman's "Phantom Menace" comments and a recent piece by Teresa Ghilarducci.

The inflation is imminent camp is represented by gold bug and hedge funds that are building long positions in various types of real assets.

Bloomberg columnist Matthew Lynn presents a list of presumed inflation risk hedges in a recent column:

• Real estate
• Oil
• Equities
• Luxury goods
• Private equity funds