The Fallacy of Treasury Inflation Protected Securities (TIPS)

I was watching the Communism Channel, and the comedians said "If you are concerned about inflation, you should buy Treasury Inflation Protected Securities (TIPS)!"

A TIPS bond contains an adjustment, based on CPI-inflation. The interest paid increases at the rate of CPI-inflation. Similarly, the principal due at maturity increases.

The problem is that the CPI is a biased measure of inflation. It severely understates the true inflation rate.

Further, the expected return on a TIPS bond is *EXACTLY THE SAME* as the expected return on a regular Treasury bond. If the expected yield were different, then traders at a bank or hedge fund would buy one and short sell the other!

Investing in a TIPS bond, you have the illusion of protection from inflation, while the State steals your savings.