Hacker News Reader

Comment by hnnewguy | Hacker News Reader

>investors would rather hold scarce assets such as equities and real estate than a rapidly diminishing percentage of the money supply (i.e., cash)

Do you have any data to back this up? It is my understanding that the demand-for and holding-of cash (specifically the USD) reached epic proportions in 2008 (as happens during financial crises, hence the need to print) and remains very high.

View on HN

At the same time as this tech boom, S&P 500 companies are (I'm told) busy borrowing fistfuls of money in order to pass it on to shareholders through dividends and share buybacks. That seems to suggest that investors are happy to have cash right now; it also puts the complaints about excess or wastefulness against the current SV boom into some perspective ...

Isn't that borrowing more because of US tax policy causing vast amounts of money to just sit there in foreign bank accounts for those SV companies?

Well, to be clear, an asset purchase transaction (ex the Fed) does not change the number of "dollars outstanding" (the money supply). To be more precise in my language, investors prefer holding assets to cash at a specific asset price. The evidence for this is in the rise of asset prices (even more specifically, the rise of multiples, since underlying values change over time). The specific phenomenon you are referring to during the crisis itself is a flight to safety/liquidity, which is unrelated.

The key here is the context of inflation risk. In an inflationary environment, his point holds with the rational investor. Most people would rather invest in something than effectively lose money by holding cash.

Reply on news.ycombinator.com