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>My wager would be that dollars that are currently chasing returns in the stock market may shift to wages resulting in those same dollars now trying to buy cons
by macspoofing 6y ago
>My wager would be that dollars that are currently chasing returns in the stock market may shift to wages resulting in those same dollars now trying to buy consumer goods rather than stock.
OK ... but if the money supply stays the same, then all you're doing is just shifting the demand curves from one set of products (stocks) to another (TVs?). Put anther way, some things will go up, and some things will go down because spending habits changed. This happens now. It's not inflation just because the price of roses goes up in February.
- willcipriano 6y agoI agree it isn't inflation in the classic sense, I'm not sure of a great term for this effect. A thought experiment, if I printed up a dollar for each one in circulation then put them in a vault that shouldn't cause inflation even though the money supply has doubled, similarly if in a thousand years someone opens the vault and puts those dollars into circulation inflation happens even though the money supply has unchanged. My thesis is dollars that go between hedge fund to hedge fund are "in a vault" compared to dollars that are buying food at the local Walmart. If some of those hedge fund dollars ends up in the hands of a individual (say a minimum wage increase causes firms to halt buybacks and direct that money toward payroll) that would cause inflation of consumer goods as now we have more dollars chasing the same output.