Sovereign Man’s Freedom Podcast Episode 2: Asset Price Inflation

In last week’s podcast — the first podcast episode we’ve published in a few years — Viktorija and I discussed how central banks engineer inflation… and why inflation is probably here to stay.

In this week’s episode, we dove even deeper into the topic to discuss a different type of inflation: ASSET price inflation.

Remember that inflation rises whenever the amount of money in an economy increases relative to the amount of services and products available to purchase.

And that even includes assets. There are only 500 companies in the S&P 500, which essentially means there’s a fixed number of assets available for investors to purchase.

So whenever the central bank prints trillions of dollars, much of that money finds its way into the stock market, bidding up the stock prices of S&P 500 companies.

The bizarre part is that this increase in stock prices doesn’t mean that a company has become more successful.

In fact, Coca Cola is a great example here. Over the past decade, Coca Cola’s revenue has fallen. Its equity has fallen. Its profit has fallen. Its debt levels have exploded.

Coca Cola has clearly become a LESS valuable company over the past decade. And yet its stock price has soared to record highs.

Coca Cola’s record stock price has nothing to do with the company’s success; it has everything to do with the tidal wave of cash that the Federal Reserve has printed. Much of that money has made its way into the stock market, pushing up share prices– even when the companies are in decline.

This is asset price inflation.

We discuss this phenomenon in a lot more detail in today’s podcast… including why it’s so dangerous (because asset price bubbles always pop, eventually).

Moreover, we discuss alternative asset classes– like venture capital and private equity, as well as why right now is such a great time to start a business.

You can watch the video here:

Or download this week’s episode of our Freedom Podcast here:

 

About the author

James Hickman (aka Simon Black) is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.

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