Inflation is on track for 0.44% annualized in 2020, about 1/4 of an average year due to the reduced velocity of money caused by the downturn more than offsetting the new money being printed.
Is there a way in which finical assets can inflate more the basic of goods that make up inflation metrics? Is gold even part of the index?
Like if all that new money isn't being used to buy things like food or even housing that factor into the inflation index than wouldn't we see something like this where gold and the stock market inflate because that's where the cash is going?
Maybe all the new money ends up in the hands of the rich elite, who just funnel it into the stock market, so it never really ends up inflating real assets. I could totally buy that these are the types that care the most about making the slider go to the right, and don't necessarily spend much of their money (or have so much of it that they already spent it on everything they possibly could).
Lets assume the inflation remains contained in the financial sector. What does this mean e.g. for a young family with no inherited wealth, with average income and savings rate? How should they invest their savings? Isn't it more difficult for them to "break even" (in the sense that their capital income offsets their share of contributing to others capital incomes) than before the asset price inflation?
At a given instant in time, each unit of currency has to be owned by someone. So if the money supply increases by 10%, by the pigeonhole principle, there is at least one entity with 10% more money in one of their accounts.
Now I'll buy the idea that isn't necessarily going to cause shortages and price rises in consumer goods, but the idea that it doesn't cause changes in asset prices is too much. Are these rich people supposed to be idiots? There is no return on cash and new money is being created at a fast clip.
