Money Printing I Rising Asset Prices - Thoughts?

Discussion in 'Investment Strategy' started by Laney, 29th Apr, 2020.

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  1. Laney

    Laney Member

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    Does anyone have insight as to the accuracy of this theory that's doing the rounds of the internet...

    That the money printing (currently happening in US and Australia) will show up as inflation in capacity constrained asset markets - such as shares and property.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    I think that is the general theory - printing money leads to inflation. But there will be competing forces with property and share values.
     
  3. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent

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    It is true, but money printing (inflation) requires velocity to turn into increased prices.

    To illustrate, if you were to counterfit $1tln (which is essentially what the Fed just did), and then stuff it under your mattress, you have created inflation but it would have no impact on prices because the currency had no velocity.

    So, price increases are caused by inflation of the money supply PLUS velocity. Velocity usually comes later as confidence improves.

    it is reasonable to assume that there will be significant price inflation kicking off probably before the end of this year.
     
    Nir likes this.