Assets, Money, and Commodity Price Inflation under Uncertainty

Abstract

Financial assets produce no consumption goods. They cannot be used to satisfy such human desires as food or shelter. Instead, their value stems from claims on future As these claims fluctuate ln expected magnitude, in risk of being satisfied, and in the time until fulfillment, asset prices also vary. That much economists and men of affairs take for granted. But the precise relations between asset prices and individual expectations, risk preferences, and time preferences are not well understood. Economic tradition has assigned to financial assets the quality ofvalue storage. Money has received additional credit as a medium of exchange, that is, a completely liquid asset; but both characteristics can be subsumed under the phrase, claim on consumption. For example, the liquidity value of a currency arises from its immediate recognition.l C)ne can easily verify this by noting the differences in waiter response when paying for lunch with dongs in New York and Hanoi; or,