We cannot know how effective the debt monetization will be and therefore the degree of inflation and financial repression that will be called for. We can be 99% certain that the money printers will do all they can to implement the financial repression model as far as the eye can see in an attempt to rebalance the debt ratios over the coming years. Market timing things, in the short term, is always tricky but when you stand back and see the maths of the situation on a longer perspective the micro moves are pretty meaningless given the degree of monetization (currency debasement) that must occur.
I’ve put together a simple spreadsheet which illustrates some example inflation rates, how the system of financial repression may work looking forward on two asset classes. Ie cash vs stocks. Stocks earnings will likely underperform inflation but they will succeed in hedging much of the monetary debasement. Cash will be an appauling investment in the coming decade as more and more money is created through the banking system & central banks. The maths is not exactly complex but it is important to unpick the assumptions etc. Targets etc are actually completely meaningless in money debasement environment as i hope we all understand. I site the 61846 target on the dow as a function of the assumptions i have used. Imo the assumptions are not bold assumptions. They are fairly conservative i would argue. I actually suspect the dow will go much higher than this in $ terms as things get out of control in the coming years. Lets see..
All the best
Rich
(8 votes, average: 4.88 out of 5)
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