“If you take cash, on the other hand, and you think about it from a purchasing power standpoint, if you own cash in the world today, you know your central bank has an avowed goal of depreciating its value 2% per year,” Jones said in May. “So you have, in essence, a wasting asset in your hands.”
Conversely, inflation rewards those who hold debt – because debts will be paid off in future devalued dollars.
Of course, there is a lot of hand waving going on that “this time its different”. Seems like we’ve heard that phrase before … the current theory is that if no one spends much money, then there is little demand to drive inflation.
That may be true in the short term – there are some items I am interested in buying but they remain in short supply due to supply chain disruptions, so I’m am not buying. Also, this was the year I had planned on – at long last – learning to travel. But all trips were canceled for the year and travel does not look to be fun or convenient for at least another 6-9 months. When supply chains restart and refill and activities like travel and going to restaurants become possible again, will that demand suddenly ramp up?