The Hindu Business Line : Nuggets: "“Inflation works in three ways. One, by lowering real prices and, two, by threatening continued erosion in purchasing power of cash. A third is through the “wealth effect”: When asset prices inflate, people misperceive the inflation as true wealth and increase their spending.”
“In the long run most things will appreciate in value, but the problem is that most companies live only 30 years and then they die. In other words, they go bankrupt. So when people talk about stocks going up in the long run, one would have to constantly re-balance one’s portfolio. One could also argue that stocks go up sometimes but they fall as a result of inflation adjustment or in other words against another currency or gold.”"
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