The velocity of money matters enormously here as well as the sheer supply of money, does it not?
JR: Velocity is something that will change enormously if all the little men do their three-ha’penny worth of spending money, which until now they have been having on deposit. Do you think velocity also applies to asset prices? Do you think we are going to see more bubbles and busts? JR: When it becomes clear inflation is out of control, assets will have to be raked downwards. Equities will suffer very badly in this environment. One of the things we are doing badly at the moment is Japan. We have nearly 35% of our equities in Japan. That has been a big mistake. We would have done much better having it anywhere else but it is uncorrelated and Japan is intensely interesting and jolly cheap. Might equities just stall and go nowhere, becoming dull, boring and not very profitable? JR: Yes. For Americans, the 1930s Depression is what the Battle of Somme was for the British. It is the event that must never happen again. This time it will play out through inflation, currency compromise and that
