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Cash does not have a negative coupon. Cash has no coupon. I feel introducing quasi terminology helps confuse rather than help. Index linked bonds, I think you

Cash does not have a negative coupon. Cash has no coupon. I feel introducing quasi terminology helps confuse rather than help. Index linked bonds, I think you're getting at the concept by talking about inflation, are linked to price changes. Check the actual price index (CPI, RPI, etc) of linkage for what price changes. Most bonds are not index linked, not hedged against inflation, and have a fixed coupon. Whether or not that fixed coupon is or isn't above inflation depends on what inflation is. That's why bonds are classed as 'fixed income', or in alternate terminology 'financial assets' (not 'real' where 'real' has some link to inflation, or nominal incomes). Further, bonds vary widely in terms of coupon, can be stripped of coupons, etc. So rather than coupon, yield to maturity might be more useful to look at vis inflation.

FabHK 3y ago
Cash has no coupon, so it has negative coupon as soon as you switch your analysis to real terms. In fact, in the context of the fundamental theorem of asset pricing (every asset discounted by a suitable numeraire is a martingale under the probability measure induced by that numeraire), cash isn’t even an asset (instead, the interest bearing bank account is one).
imtringued 3y ago
Inflation is a necessary evil because paper is static and can't display real values. People who expect money to store value directly must be insane. I mean think about Roman empire currency being valid today. That is impossible. Money is only valuable within an economy that accepts it. Money from the past is no longer in the economy that is used to be accepted in. Every time period could be considered its own economy. Storing value or carrying value into the future can only happen in the real world, not with money itself, which is just a managerial system. In the real world, objects degrade, expire, require maintenance or constant energy inputs. Once humans are gone, nature will simply take over. The disconnect between money and the real world must manifest itself as inflation.
- throw0101b 3y ago
  > Inflation is a necessary evil because paper is static and can't display real values. In some way (low) inflation is a feature and not bug: having money just sit around unproductively Scrooge McDuck-style is a waste of resources. Having cash (slowly) lose its value incentivizes its investment into productive assets and help move the economy around. Why does anyone expect / 'deserve' to earn returns on money that just sits around doing nothing?

FabHK 3y ago

Cash has no coupon, so it has negative coupon as soon as you switch your analysis to real terms. In fact, in the context of the fundamental theorem of asset pricing (every asset discounted by a suitable numeraire is a martingale under the probability measure induced by that numeraire), cash isn’t even an asset (instead, the interest bearing bank account is one).

imtringued 3y ago

Inflation is a necessary evil because paper is static and can't display real values. People who expect money to store value directly must be insane. I mean think about Roman empire currency being valid today. That is impossible. Money is only valuable within an economy that accepts it. Money from the past is no longer in the economy that is used to be accepted in. Every time period could be considered its own economy. Storing value or carrying value into the future can only happen in the real world, not with money itself, which is just a managerial system. In the real world, objects degrade, expire, require maintenance or constant energy inputs. Once humans are gone, nature will simply take over. The disconnect between money and the real world must manifest itself as inflation.

throw0101b 3y ago
> Inflation is a necessary evil because paper is static and can't display real values. In some way (low) inflation is a feature and not bug: having money just sit around unproductively Scrooge McDuck-style is a waste of resources. Having cash (slowly) lose its value incentivizes its investment into productive assets and help move the economy around. Why does anyone expect / 'deserve' to earn returns on money that just sits around doing nothing?