Sweep the Leg Wrote: ------------------------------------------------------- > equity_analyst Wrote: > -------------------------------------------------- > ----- > > The fiat price rise in equity assets due to > money > > printing does not represent a true increase in > > wealth. > > I argue with ZHers all the time about this. It > does actually result in increased wealth as long > as it’s realized. Case in point, I just bought a > new house and used proceeds from my investment > portfolio for the down payment. That increase in > my “paper” portfolio put a roof over my head. My > investments increased in price vs a flat/declining > housing market. I was able to buy more house. > That is not an illusion. > > Over the long term, I completely agree with you > though. It does create wealth but that wealth is not distributed evenly. Not everybody can afford investing in the stock market but everybody needs to eat and drive a car. The recession and the solution we came up with create a typical case of the rich getting richer
http://research.stlouisfed.org/fred2/series/BASE The FED tripled the money supply. Prices must rise eventually.
…unless money velocity takes a permanent collapse… or corporate productivity rises substantially. Or banks don’t lend. Which one of these has happened… wait… ALL of them (though the velocity collapse isn’t necessarily permanent). I’m not saying there isn’t a high risk of inflation, and it’s also clear that the fed prefers erring on the the side of preventing deflation (which is appropriate). But it’s not nearly as guaranteed an outcome as people seem to think.
Sustained deflation is not possible with fiat currencies. You can always print more money.
^Japan ?