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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Hawkmoon who wrote (88795)3/18/2001 9:58:16 PM
From: Tommaso  Read Replies (1) of 95453
 
" money supply shrinks as cash is exchanged for
equities, "

So does the money disappear?

No--it just moves to another bank account.

The exchange of equities for money has no effect at all on the money supply. But the amount of money available definitely has an effect on the price of equities.

Up to a point. When money is increased too far beyond the goods and services available for purchase, it starts to lose value. And that is what will happen if it keeps increasing at a 25% per annum rate.

Equities, reasonably priced (P/Es 10 or less on the whole, yields 5% or better) are a good hedge against modest (1-4%) annueal inflation.But when inflation becomes disruptive of economic activity (10% and higher) equities are much more volatile and unreliable as an investment. Land is better. Gold may be OK. Nothing is terribly good because rational economic activity is disrupted.
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