Re: Inflation
In practice many stocks don't do well in times of high inflation. If you have stagflation, higher inflation and higher unemployment, people are not earning enough to pay the higher prices.
Pick one commodity, like energy. Hold everything else constant. Energy prices are rising faster than people's salaries now. So hold money supply and earnings constant.
As gas prices go up, everyone has less left in their budget, after buying gas to buy everything else.
Stock prices, over the long run, depend on profits earned by corporations. If people have less to spend, most corporations will not earn as much profit.
So stock prices should go down.
Only certain companies, selling certain essential high demand products, will keep pace with inflation.
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