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> Inflation: During periods of moderate to high inflation, gold and commodities tend to do extremely well. Equities outperform bonds more often than not, but it depends on the type of equities and their starting valuations, and therefore have a huge variance. Real estate does well, mainly because leverage attached to it gets melted away from inflation. Bonds do poorly in inflationary environments. The article doesn't…
I've wondered what the effect our modern digital economy has had on consumer price inflation. Normally, an increase in money supply would cause consumer goods to increase in price, since more people are able to buy them and there is a limit on how much of any particular physical good is available. This isn't the case, however, for digital goods. If there are suddenly 100 million new people who want to buy a Netflix s…
Digital goods do nothing to support human life - food, water, housing. Sure you can buy things online, but you can buy those things at brick and mortar stores. In turn, gas prices will rise to the point where delivery services become unviable.
Inflation touches the entire chain whether the product is digital or otherwise.
Earlier quoted context omitted.
I have no idea why so many people quote velocity but it is an output, not an input. Saying that velocity is falling when supply isn't interesting or relevant. The question is whether supply is growing in excess of demand (as ever).
Because money which isn't spent doesn't contribute to inflation. It might contribute to inflation, but prices don't increase in reaction to possible buyers, only actual buyers (or the expectation of actual buyers, but that's a short term effect since if the customer doesn't materialize you've still got bills to pay).
Also, you are wrong about prices not increasing "in reaction to possible buyers". If we lived in the fabulous world of rational expectations and flexible prices moving instantly but we don't. Understanding why this isn't the case, ironically, is why we use monetary policy/inflation targeting.
> Inflation: During periods of moderate to high inflation, gold and commodities tend to do extremely well. Equities outperform bonds more often than not, but it depends on the type of equities and their starting valuations, and therefore have a huge variance. Real estate does well, mainly because leverage attached to it gets melted away from inflation. Bonds do poorly in inflationary environments. The article doesn't…
Crypto
The only thing I would try to add that she left off was just the Fed's power[0] over this entire topic. It's mentioned slightly with interest rates dropping, but they play such a pivotal role, together with the yield curve, that it needs to be mentioned.
The Fed has the power to have a yield curve inversion, which drops the amount of broad money available, which creates a recession, which has people lose their jobs, which depresses CPI inflation. Once the loss of jobs occur, they drop interest rates back to where they were and along we go for another cycle.
I've wondered what the effect our modern digital economy has had on consumer price inflation. Normally, an increase in money supply would cause consumer goods to increase in price, since more people are able to buy them and there is a limit on how much of any particular physical good is available. This isn't the case, however, for digital goods. If there are suddenly 100 million new people who want to buy a Netflix s…
Computers and other electronics are cheaper than ever on a real and absolute basis despite increased demand and increased money supply
Earlier quoted context omitted.
That hockey stick is neutralized by reverse hokey stick. Velocity of M2 Money Stock/Population https://fred.stlouisfed.org/graph/fredgraph.png?g=DPfD
I have no idea why so many people quote velocity but it is an output, not an input. Saying that velocity is falling when supply isn't interesting or relevant. The question is whether supply is growing in excess of demand (as ever).
If prices would always increase when money stock increases, velocity of money would not change.
I've been researching this topic independently over the last year and about 70% of what I've researched is presented beautifully within this article. What a great post. The only thing I would try to add that she left off was just the Fed's power[0] over this entire topic. It's mentioned slightly with interest rates dropping, but they play such a pivotal role, together with the yield curve, that it needs to be mention…
I've been researching this topic independently over the last year and about 70% of what I've researched is presented beautifully within this article. What a great post. The only thing I would try to add that she left off was just the Fed's power[0] over this entire topic. It's mentioned slightly with interest rates dropping, but they play such a pivotal role, together with the yield curve, that it needs to be mention…