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@ nicodemus
2025-04-23 14:06:35
Help me understand the difference between consumption and buying stocks/real estate?
The money remains in circulation in both cases. Debt isn’t paid off or defaulted on, so the money isn’t destroyed. It isn’t printed or lended beyond any normal rate, either. So there is no atypical expansion. Inflation continues to, at worst, remain flat as the money continues to exist.
Hyperinflation is a result of increased money supply relative to goods/services causing a feedback loop.
If all of that money was suddenly recirculated via retail outlets, restaurants, and …stuff… it may increase the demand for those sectors and cause some inflation temporarily, but the total amount of money in circulation hypothetically remains the same. High prices would cure high prices.
In hyperinflation, a necessary ingredient is increased money supply (pick your favorite method: printing or lending). This prevents high prices from coming down as the increased supply acts as a backstop. Worse, the supply is continually and rapidly increasing to combat the inflation.
If the money left investment, it means less money in the hands of businesses and more in the governments via higher taxes (sales, income). Follow this through to the end, and to me it appears net deflationary, not inflationary as the same amount of money exists but businesses will suffer slowly as it is moved to government waste. So much of business today is dependent on being flush with investment funds rather than operating on real revenue - precisely due to all of the mal-investment.