Re:Abundant Capital
by bobthepanda on Monday February 22, 2021 @04:37PM
(#26230993)
If you want to not get hurt, b makes this not necessarily a good idea.
If you think things are overvalued, there are two ways for it to go:
- the value of equities crashes in nominal terms and consumer prices are stable
- the value of the dollar itself declines, so that the nominal values of equities stay the same but consumer prices inflate to make the real value of equities revert to the norm
It’s probably a mix of a and b, but outcomes that tilt more heavily towards the latter would hurt people holding cash more. And right now b is closer to official Fed policy, since it would prefer that to getting into a Japanese deflation trap.
If you think things are overvalued, there are two ways for it to go:
- the value of equities crashes in nominal terms and consumer prices are stable
- the value of the dollar itself declines, so that the nominal values of equities stay the same but consumer prices inflate to make the real value of equities revert to the norm
It’s probably a mix of a and b, but outcomes that tilt more heavily towards the latter would hurt people holding cash more. And right now b is closer to official Fed policy, since it would prefer that to getting into a Japanese deflation trap.