How is the Nash equilibrium for stock prices infinity when inflation is greater than the interest rate on bonds? The Nash equilibrium is for the market to sele

How is the Nash equilibrium for stock prices infinity when inflation is greater than the interest rate on bonds? The Nash equilibrium is for the market to select some good other than Federal Reserve Notes to use as a store of value. People can just keep borrowing money, investing it in something like gold, and the price will continue to appreciate in terms of dollars. As everyone start to do that their is a full fledged currency run. The price of everything in dollars heads towards infinity as the dollar becomes worthless. (perhaps worthless is an overstatement as the government might still create some demand by taxing in dollars. But effectively worthless compared to its value now). This article illustrates more clearly how the scenario can play out: http://www.safehaven.com/article-5205.htm http://www.safehaven.com/article-5205.htm (note that the author's prediction did not happen, because monetary inflation came to an abrupt stop in 2008. Not coincidentally, the stock market proceeded to crash). Rising prices could be just as easily explained by real increases in real total wealth while the quantities of some good remained fixed, or at least grew slower than the overall economies rate of growth. The price of good X is simply the ratio at which market actors are willing to exchange X for dollars. For the price to rise, one of four things must happen: - The supply of X can be decreasing - The supply of dollars can be increasing - Demand for X can be increasing - Demand for dollars can be decreasing Changes in the supply and demand for dollars we call "monetary inflation". So if you say the rising prices are some other cause, it can either be the supply of X is decreasing or the demand for X is increasing. Now we know that the supply of gold or real estate is not decreasing. So that leaves us with the possibility that demand is increasing. But the price increase is happening in every category of good - gold, oil, farm land, downtown skyscrapers, copper, stocks, etc. When demand for every good denominated is increasing, that's basically synonymous with saying that demand for dollars is falling. For further evidence, note that MZM and total credit creation were also rising at ~10% a year. These are both a more direct measure of monetary inflation.