It’s truly wonderful how you always seem to address the topics that are on my mind, Peter - thank you! I was very perplexed last week when I saw that tech stocks lost one TRILLION dollars in value, at the same time that the Dow hit an all-time high. What the heck? Am I that stupid about finance? It’s reassuring that the geniuses are also scratching their heads. You’ve given us a smart and concise roundup on which to base our figuring going forward.
While we’re on the subject of finance, I’m been wanting to ask you what you think of the new Trump accounts for newborns. On the one hand, they may shore up the stock markets for decades, and prevent a collapse. On the other hand, are they just a new form of asset inflation?
I am inclined to think they won't be, not unless those accounts experience a substantial amount of churn as investment accounts.
One thing I am coming to believe has not been emphasized nearly enough in inflation discussions is the role of money velocity. If you go back and review Friedman's original work on the topic, he actually highlights velocity. Inflation is driven even in Friedman's original conceptualization not by the quantity of money so much as the number of times a given quantity of money changes hands. More velocity means more transactions means more demand for assets (or goods) means more purchases of assets (or goods) means fewer assets available to meet demand. The result of that final step is where we get inflation.
A savings account where funds tend to park and remain in place would therefore be disinflationary. Stationary funds represent a reduction in overall money velocity.
If the institutions managing those accounts go hogwild in the marketplace with those funds, producing a lot of investment churn, then you could see asset price inflation from those accounts, but I figure that's more the consequence of how the accounts are managed than the accounts themselves.
Broadly speaking, if the idea takes hold and American newborns start off life with a bit of equity already, the accounts could be transformational in facilitating wealth acquisition across the economic strata. It's less redistributionist than straight welfare payments, and if we as a society can create a culture of wealth creation even in the lower economic strata the societal as well as economic benefits could prove significant.
I'm intrigued by the idea. I'm not a big fan of government doing such things but I can see a scenario where the benefits outweigh the costs.
I’m so glad to hear this, Peter as I am also intrigued. I love the idea of newborns getting some equity (hey! Isn’t that the word the LEFT loves?) right from the start. Most young parents have had zero education in how to build wealth.
As always, I am impressed with your intelligence and knowledge, Magnificent Man!
It’s truly wonderful how you always seem to address the topics that are on my mind, Peter - thank you! I was very perplexed last week when I saw that tech stocks lost one TRILLION dollars in value, at the same time that the Dow hit an all-time high. What the heck? Am I that stupid about finance? It’s reassuring that the geniuses are also scratching their heads. You’ve given us a smart and concise roundup on which to base our figuring going forward.
While we’re on the subject of finance, I’m been wanting to ask you what you think of the new Trump accounts for newborns. On the one hand, they may shore up the stock markets for decades, and prevent a collapse. On the other hand, are they just a new form of asset inflation?
Are the Trump Accounts inflationary?
I am inclined to think they won't be, not unless those accounts experience a substantial amount of churn as investment accounts.
One thing I am coming to believe has not been emphasized nearly enough in inflation discussions is the role of money velocity. If you go back and review Friedman's original work on the topic, he actually highlights velocity. Inflation is driven even in Friedman's original conceptualization not by the quantity of money so much as the number of times a given quantity of money changes hands. More velocity means more transactions means more demand for assets (or goods) means more purchases of assets (or goods) means fewer assets available to meet demand. The result of that final step is where we get inflation.
A savings account where funds tend to park and remain in place would therefore be disinflationary. Stationary funds represent a reduction in overall money velocity.
If the institutions managing those accounts go hogwild in the marketplace with those funds, producing a lot of investment churn, then you could see asset price inflation from those accounts, but I figure that's more the consequence of how the accounts are managed than the accounts themselves.
Broadly speaking, if the idea takes hold and American newborns start off life with a bit of equity already, the accounts could be transformational in facilitating wealth acquisition across the economic strata. It's less redistributionist than straight welfare payments, and if we as a society can create a culture of wealth creation even in the lower economic strata the societal as well as economic benefits could prove significant.
I'm intrigued by the idea. I'm not a big fan of government doing such things but I can see a scenario where the benefits outweigh the costs.
I’m so glad to hear this, Peter as I am also intrigued. I love the idea of newborns getting some equity (hey! Isn’t that the word the LEFT loves?) right from the start. Most young parents have had zero education in how to build wealth.
As always, I am impressed with your intelligence and knowledge, Magnificent Man!