Having lived through both outcomes, high inflation and high wages vs low inflation and low wages. I prefer to pick the former. At least I can outwit the market with proper investment and timing while with the later, no such opportunity exists. What are we going to do? Short the market to zero? Investors do not want to see the RMB strengthen against their personal assets. That only happens during depressions. They want to see their personal assets strengthen against the RMB meaning that their homes, their equities, their gold and silver rise in value. And that value is measured in RMB.
Contracting the money supply changes the ratio between RMB and personal assets. Thus the price of personal assets fall. Even though people still own the same quality and quantity of personal assets before monetary contraction, psychologically, these people feel ruined.
Interest rates should always be kept low and the money supply loose. All booms and bust cycles are man made, and it makes no sense to intentionally sink your own economy.
No comments:
Post a Comment