If people are holding cash because they don't know what to invest it in then it's like it doesn't exist. It doesn't move through the economy. If something worth buying came along then the cash would come out of the mattress and into the economy, which would pop the cash bubble (i.e. cause high inflation).
Why would cash being invested "cause high inflation"?
Inflation depends on a number factors, whether it be productivity, supply, unemployment, etc, or how that cash is being spent. If it's being invested, who's to say it isn't in capital goods, thereby reducing cost of goods?
> Why would cash being invested "cause high inflation"?
Because it puts more cash back into the economy. It transfers cash from people who previously hadn't been spending it to people who might not be so reserved.
> If it's being invested, who's to say it isn't in capital goods, thereby reducing cost of goods?
That's just the butterfly effect. It's the equivalent to saying that the fed printing money can cause deflation because people might use all the money to pay down debts and then use what would have been interest on the debts to pay down even more principal. It's theoretically possible, and sometimes it even happens, but you still don't expect printing money to cause deflation in general.
To me this suggests that cash can be considered part of the "almost everything" that is overvalued. Yet since value is always relative, the concept is probably just not an accurate reflection of reality, i.e. economics is bullshit.
I reckon it's a pithy statement the finance news is prone to making, and requires further elaboration.
It's clear to us all when one says there is a bubble in housing, but this doesn't make much sense, and may well on further elaboration be found to be nonsense!
If one were to be treating cash an as investment, i.e. in a savings account, then one would think a cash bubble would be where you're getting a relatively good return, and were the bubble to burst, the return would collapse. That's clearly not the case now: cash returns little or a loss (interest - inflation).
And in terms of its value, rather than its return, well it's been losing value there too, relative to stocks and housing. So hard to see a bubble there either.
Imagine there is incredible amount of cash but it's not used. Cash seems still valuable. Overvalued even when you compare its percieved value with the value it would have when all that dormant cash would hit the market.
How can a bubble be "in cash"?