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Worse, with consumer prices sticky in concert with commodity prices that are most sensitive to dollar-price movements, the beneficiaries of the money illusion tend to be the hard, unproductive assets of yesterday (think housing, art, rare stamps, and oil) that are least vulnerable to currency weakness, and which in fact do best when the unit of account is devalued.
FORBES: Price Stability Is An Economically Dangerous Fad
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Another way of putting it is that a flexible exchange rate makes sticky internal prices and wages flexible to the rest of the world.
FORBES: Greek Crisis: Austerity Doesn't Work
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Considered from an investment standpoint, commodities such as oil and gold continue to rise in nominal terms while the dollar falls, but sticky consumer prices remain relatively stable.
FORBES: Price Stability Is An Economically Dangerous Fad
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The problem is that nominal incomes and prices are sticky in a downward direction.
FORBES: Greek Crisis: Austerity Doesn't Work
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In countries where these prices are sticky, such as Argentina, the risk of currencies becoming overvalued is high.
ECONOMIST: The ABC of a currency board
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As a result, ETF holdings have remained sticky even when gold prices fell.
FORBES: ETF Securities' Brooks: Short-, Long-Term Gold Participants Can Have Varying Reactions To Fiscal Cliff