At the end of the article on September 26, a reader left the following comment:
I am the first type of person mentioned in this article. I still have some spare cash and do not plan to invest in the big A market again. My question is: after the massive monetary easing, cash will definitely depreciate. Not investing in the big A, and I dare not enter the real estate market, and the cryptocurrency market is so weak. As a small investor, what strategies can I adopt? How can I preserve the little life-saving cash I have painstakingly accumulated?
“After the massive monetary easing, cash will definitely depreciate” — this statement depends on the perspective from which it is viewed.
First of all, I believe that the central government will definitely take various measures to stabilize various risks and support the economy. Of course, whether these measures will be effective or not is something we will set aside for now. What we consider is what the situation would be if these measures really do stabilize the economy.
It is evident that after these measures are taken, money will inevitably overflow into certain areas.
At this point, several scenarios may arise:
The first scenario is that the money directly overflows into daily necessities, raw materials, basic supplies, etc.
The second scenario is that it overflows into areas that the economy genuinely needs, such as companies in urgent need of relief and businesses facing liquidity shortages.
The third scenario is that it overflows into markets with financial attributes.
Among these three scenarios, the first one directly leads to inflation, and in this case, cash will definitely depreciate significantly.
This is certainly not what the central government hopes to see, but the final outcome is not subject to subjective will.
I believe this situation could happen, but it is hard to say how likely it is.
What if it really happens?
As ordinary citizens, our current methods to combat inflation are actually very limited: probably just buying precious metals, investing in niche markets, or purchasing real estate.
Among these methods to combat inflation, buying precious metals can be a small part of the strategy, but it is merely symbolic; the actual effect is not significant because:
Precious metals (including gold and silver) are not cheap now, and the risks involved must be weighed when purchasing.
Of course, industry insiders predict that gold may very likely rise above $3,000 by the end of the year or next year. But even if this prediction is true, the increase from the current $2,700 to $3,000 is only a 10% rise. This 10% increase offers almost negligible protection for ordinary citizens in the face of real inflation.
Buying real estate used to be effective, but now and in the foreseeable future, I do not believe it can combat inflation. Although the government has already introduced many measures and may introduce more in the future, it would be quite remarkable if all these measures could stabilize housing prices and prevent further declines. The possibility of reversing the trend and allowing prices to rise enough to resist inflation is very small.
The overall appreciation of the real estate market as a means to combat inflation has become a thing of the past in our country.
Investments in niche markets are meaningless and impractical for the general public, so I will not elaborate on that here.
Therefore, when we really encounter significant inflation, for ordinary citizens, if there are no reliable investment methods, aside from a small allocation in precious metals, the only option left is to keep the money in the bank.
Although it seems like allowing money to depreciate, this is still more reliable than randomly investing in so-called “value preservation.”
I estimate that many readers may not accept this conclusion, but this is the harsh reality.
In this situation, everyone is collectively sinking, and the competition is about who can hold on the longest, who can survive longer. As long as one lives a day longer than others, there is a glimmer of hope.
The second scenario is what the government most hopes to see.
If this situation occurs, ordinary citizens do not need to worry too much; our future will get better and better, so there is no need to worry too much about money depreciating. It is better to wait optimistically for new hope to arrive.
But I do not know how likely this situation is to occur.
The third scenario, in my view, is also quite likely to happen. It is not as good as the second scenario, but it is certainly better than the first scenario and is a situation that the government can accept for a certain period.
If this situation occurs, which areas across the country with financial attributes can absorb the large amount of money released by the government?
I believe the real estate market is not a possibility.
This money also cannot flow massively into overseas markets (the renminbi has not achieved free convertibility).
What other areas are left for readers to think about.
“The cryptocurrency market is so weak,” this depends on how one views it.
It is hard to say in the short term, but I have always been optimistic in the long term and have never doubted it. Recently, when Ethereum was below $2,500, I was still dollar-cost averaging.
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