The Returns on Government and Corporate Securities with Prices Propped up by Central Bank Purchases using Unlimited Quantities of Currencies with Less Intrinsic Value than Toilet Paper
Journal of Investing (August 2020), Forthcoming
20 Pages Posted: 5 May 2020 Last revised: 8 May 2020
Date Written: May 6, 2020
This paper evaluates several investment scenarios which could result from the rather dire economic situation existing in early 2020 caused by the coronavirus pandemic that is restricting economic production of goods and services at the same time that cost-push factors and the unlimited creation of money by central banks worldwide create upward inflationary pressures. Just as during the similar situation in Germany in 1923, the nominal prices of both equities and fixed-rate instruments might be propped up, but all security investments would generate highly negative real returns short-term. Only stock prices might eventually match the inflation rate.
Keywords: hyperinflation, investments, coronavirus pandemic, financial crisis
JEL Classification: G01
Suggested Citation: Suggested Citation