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

See all articles by Austin Murphy

Austin Murphy

Oakland University - School of Business Administration

Date Written: May 6, 2020

Abstract

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

Murphy, J. Austin, 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 (May 6, 2020). Journal of Investing (August 2020), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3592388 or http://dx.doi.org/10.2139/ssrn.3592388

J. Austin Murphy (Contact Author)

Oakland University - School of Business Administration ( email )

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