What exactly is safe?

Sometimese at the front of a mutual fund prospectus, there will be a summary of different types of risk.  Things like "interest rate risk", "currency risk" "market risk", and others.  Later, under the specific fund descriptions they may outline which risks they feel the particular fund might be subject to.  I don't have any of my money in mutual funds, but I think it's a useful thing to do for our investments.  What types of risk are they subject to?

For most of the "safe" investments, they're subject to interest rate risk, inflation risk and currency risk.  I guess if you buy global bonds, there might be some political risk thrown in there as well (actually there might even be political risk for US bonds).

We've only recently exited a multi-decade long time of falling interest rates.  While some of us have experienced the high rates of the 80s, less of us have experienced the Volker-style tightening that got us there.  And why did he do that tightening?  To defend the dollar after the gold window was closed by Nixon.  Essentially to cause a money supply and credit contraction and stave off inflation.

So how long until we have another Volker?  How long until the money supply growth comes home to roost and the symptoms of inflation (rising prices) get really inflamed? 

Or is it happening now?  Do you believe the current CPI numbers?  They've been adjusted quite a bit over the last couple decades.  Here's a chart where you can see the current CPI measurement vs the measurement they used before the Clinton years:
http://www.shadowstats.com/cgi-bin/sgs?

It certainly makes sense for the CPI to understate inflation.  After all, there's lots of pensions and benefits that would become even higher liabilities if they were using the pre-Clinton CPI for the cost of living adjustments.  Understating the CPI by half is just plain good business for the government.

But what happens if this understating prevents the next Volker from doing what needs to be done to save the dollar?

Specifically what happens to "safe" investments?  What happens to the purchasing power of a "safe" bond, t-bill or bank term deposit?  if you make a garaunteed positive return in dollar terms but run a high risk of losing purchasing power to inflation risk, should the investment still be called "safe"?

Specifically what happens to "safe" investments?  What happens to the purchasing power of a "safe" bond, t-bill or bank term deposit?  if you make a garaunteed positive return in dollar terms but run a high risk of losing purchasing power to inflation risk, should the investment still be called "safe"?

This is what I mean when I say I feel like I am caught  between the millstones of inflation (so called safe investments) and a ponzi scheme (401K Mutual funds)

One major risk I see to 401k mutual funds is demographic risk.  What happens when the majority of mutual fund investors hit retirement at the same time?  They're getting very, very close!

It's hard enough to navigate the waters of weighing risk when you have complete freedom to choose your investment vehicles, but it becomes next to impossible when you have some sort of cookie-cutter plan you have to fit in.