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> The claim that, "when interest rates rise, all asset prices must fall" seems, uhm, somewhat off. It’s a necessary condition of the discounted cash flow asset
by mjdesa 4y ago
> The claim that, "when interest rates rise, all asset prices must fall" seems, uhm, somewhat off.
It’s a necessary condition of the discounted cash flow asset pricing model.
https://en.wikipedia.org/wiki/Discounted_cash_flow?wprov=sfti1 https://en.wikipedia.org/wiki/Discounted_cash_flow?wprov=sft...
- floathub 4y agoYes, a future stream of cash flows will be worth less now if interest rates rise, because the time value of money has changed. But not every asset (let alone every price) represents a future stream of cash flows. Monetary policy could be performed by a couple of NAND gates if it were genuinely the case that any interest rates rise would necessarily lower the price of everything.