Macroeconomic Cycle Made Visible in Real Terms as Protection against Asset Illusion

Uwe Bergold

Acta Oeconomica Pragensia, 2019, vol. 2019, issue 1, 21-31

Abstract: The current historically unparalleled global debt crisis and the resulting momentous valuation anomalies notably affecting the stock and bond markets (the historically low-interest rate level) are making it increasingly difficult for both institutional and private asset managers to generate an actual yield above the inflation rate. The problems with building wealth, and hence with pensions plans, first began at the turn of the millennium when the burst of the largest stock market bubble of all time firmly put the price distortions of assets into the public eye. This milestone also marked the beginning of a secular bust phase, which has been on a real gradual downtrend and despite nominal price increases is still ongoing today. However, this problem only becomes visible upon real evaluation, in ounces of gold. Contrary to the ubiquitous nominal view in uncovered paper currencies, only this real view, valued in ounces of gold, protects both private and institutional investors from an illusion of wealth.

Keywords: global debt crisis; stock market bubble; asset illusion; monetary units of measure; boom and bust cycle; Shiller P/E Ratio; Gold; paper currencies; inflation (search for similar items in EconPapers)
JEL-codes: E32 E50 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.18267/j.aop.614

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