262 THE BiG DROP
hedge funds, private equity and venture capital are not open
to all investors, because they are frequently traded as private
funds limited to accredited investors with high minimum sub-
scription amounts.
If you are unable to purchase such private investments,
there are still publicly traded equities such as high-quality bond
funds and companies holding hard assets in energy, transporta-
tion, natural resources and agriculture that offer good protec-
tion from the dual dangers of inflation and deflation.33) Fracking technology has been around for decades.
Was the shale revolution a bubble fueled by low interest
rates? Some say it will save our country, but I fear it may
do the opposite.
The American energy boom on the whole is a triumph of
American technology and entrepreneurship and will be good for
long-term growth. But as with many disruptive technologies in
the past, there will be excesses and losses and unintended con-
sequences in the early stages of this technological revolution.
America benefited greatly from the railroad boom of the late
19th century, but railroads were overbuilt or poorly managed
in some cases and many investors suffered losses on railroad
stocks and bonds. Something similar is now happening in the
energy sector, despite the clear advantages of the technology.
The benefits of fracking are obvious, which include plen-
tiful low-cost energy and lots of high-paying jobs in the oil
and natural gas fields. The problems are less obvious. For one
thing, this low-cost energy is deflationary at a time when the
Federal Reserve desperately wants to increase inflation.
If the deflationary impact of fracking causes the Fed to push
monetary ease to the point where confidence in the dollar is
destroyed, then the costs of this revolution will be very high. Of
course, this will not be the fault of the frackers, but rather the
fault of the Fed. Yet the dangers are there, nonetheless.