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This is an overly simplistic model which happens to have applied very well to Japan but would break down if applied in other economies where inflationary risk i
by adverbly 2y ago
This is an overly simplistic model which happens to have applied very well to Japan but would break down if applied in other economies where inflationary risk is present.
I'm pretty sure there's a joke about there being three types of economies: developed, undeveloped, and Japan.
Cash is useless if the value of the cash goes down by 10,000% and you don't have an inflation adjusted revenue stream. You have to do something with the cash to get enough interest to keep up with inflation.
- k__ 2y agoWhat about deflationary currencies?
- adverbly 2y agoI don't think there have been any currencies that have been deflationary for 100+ years so it's impossible to say. Obviously currency risk is what you have to watch out for though if you're not able to consistently both spend and collect from this single currency over the lifetime of your business.
- psychlops 2y agoBitcoin is a deflationary currency.
- callalex 2y agoIt’s a security/commodity, not a currency.
- psychlops 2y agoIt's a currency and used as a direct form of acceptable payment. Not as much as it's creator envisioned, but it is. It's not a security. It certainly shares attributes with a commodity although I think a characteristic of a commodity is that it is tangible.
- bigstrat2003 2y agoThat's nonsense. Bitcoin is absolutely a currency.
- phyphy 2y agoIs gold a security or a currency?
- Ekaros 2y agoBut it also has been extremely volatile over the lifetime. And quite volatile at all points.
- psychlops 2y agoNot sure what point you are making? It's still deflationary. Yes, it's volatile. Could be worse, could be better. No idea what it will do in the future as the race to zero continues with major currencies.
- drexlspivey 2y agoWhat is that?
- k__ 2y agoA currency that rises in value over time.
- bluGill 2y agoThere are more assets than cash. cash is the most accesible, but others exist and are useful to have.
- gbalduzzi 2y agoI don't read OP article as "keep all your worth in cash". Asset allocation is of course extremely important, but the main point made in the article is not having debt
- anonporridge 2y agoMy bet is most of these long lived businesses also maintain a large pile of gold, which is a fantastic multi generational store of value. But yeah, cash is really just a call on the local monopoly on violence, which changes all the time over the long arc of history. Terrible long term store of value.
- al_borland 2y agoI took the article as these businesses keep a healthy amount of assets and don’t feel an obsessive need to buy things for the business they can’t afford, or scale at all costs. If everything they have is paid for, and people are still buying stuff from their business, their prices can adjust with inflation. Some of their cash might get devalued in a period of hyper inflation, but if they still have enough to get by, as well as new sales, they should be ok. They hopefully also diversified their assets in some things that will handle an inflationary period and don’t just have mattresses full of money.