Once investors begin to doubt the real return available on sovereign liabilities, the speed with which they can respond becomes important. Modern financial wealth can be reallocated almost instantaneously. An investor dissatisfied with cash or government bonds can move into foreign equities, commodities, gold, property funds or another currency without waiting for wages, consumer prices or conventional money velocity to adjust. Monetary distrust can therefore appear first as a portfolio movement rather than as an immediate surge in spending on goods. This makes attempts to suppress sovereign yields potentially less stable. The wider the gap between the return investors believe they require and the return governments are willing to permit, the stronger the incentive to move elsewhere. In earlier periods, geographical, institutional and technological frictions slowed that process. Today, capital can react to a deterioration in expected real returns within seconds.
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Samizdata quote of the day – Capital Flight & Financial RepressionOctober 6th, 2026 |
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