> A worst-case scenario for the US is higher interest rates [wiping out current bond investors] combined with lower equities [wiping out current stock investors]. This yields inflation and removes the levers of economic control from the federal reserve -- it could be devastating.
I think "wiping out" is grossly overstated, but setting that aside... why do you think this yields inflation and removes the levers of economic control from the federal reserve?
I have the opposite conclusion, but I'm not sure.
It seems to me that if rates are higher and stocks are lower, that should make both of those more appealing investments, which would cause more dollars to flow into financial assets. Which would continue the existing trend whereby the financial world soaks up the excess dollars and very little of it gets into the "real economy" where it would increase wages of workers and cause inflation.
I think "wiping out" is grossly overstated, but setting that aside... why do you think this yields inflation and removes the levers of economic control from the federal reserve?
I have the opposite conclusion, but I'm not sure.
It seems to me that if rates are higher and stocks are lower, that should make both of those more appealing investments, which would cause more dollars to flow into financial assets. Which would continue the existing trend whereby the financial world soaks up the excess dollars and very little of it gets into the "real economy" where it would increase wages of workers and cause inflation.