[cryptica]

>> When people aren't spending, more is created.

There is a point when people have gotten wealthy to the point that they have bought everything that they could possibly want but the money keeps coming anyway.

Wealthy people will question whether or not they're actually 'earning' their passive income. The most objective ones will realize that passive income can never be risk-free; it it appears that way, then it means that the risk is systemic. For these people, it actually makes a lot of sense to hedge against systemic risk.

[arcticbull]

You're not supposed to hold dollars. Dollars are not an investment, they're a short term, intentionally lossy store of value designed to incentivize their movement within an economy.

[cryptica]

That's right, you're not supposed to, but some very wealthy people do it anwyay to prevent inflation from skyrocketing whenever the banks increase the money supply. The people who are at the front of the line for the money printers the ones who decide the money velocity and it's based on how much of the new money they decide to keep in their own pockets. They're doing it at a loss to themselves. Just to help maintain the current financial order.

[grey-area]

I have an alternative explanation for you which is much simpler and in their interests.

Cash is more liquid than assets and since in the short term inflation is a mild penalty and there is negligible return for risk free assets any more (nor are they as risk free as before), they keep large proportions in cash for the short term while waiting for assets that present a good return.

It is entirely rational to hold some proportion of wealth cash for the short term.

[xur17]

Are you really saying that some wealthy people specifically choose to hold extra cash at a loss to themselves to prevent inflation from occuring? It seems like this would easily fall into a tragedy of the commons situation - do you have any citations to back up the enormous claim?