What is the potential outcome of persistently high inflation on consumer behavior?

When inflation remains high over a sustained period, consumers often begin to lose confidence in the stability of the currency's value. This erosion of trust leads to a shift in behavior where individuals and investors prefer to hold real assets, such as real estate, commodities, or stocks, instead of cash or cash equivalents. This is because real assets tend to retain their value better than currency during periods of inflation; they act as a hedge against the declining purchasing power of money.

In this context, holding cash may be perceived as detrimental since its value diminishes over time due to inflationary pressure. As a result, consumers may actively seek out investments in tangible assets, believing they will appreciate or at least maintain value relative to inflation. This behavior reflects a rational economic decision to preserve wealth in the face of decreasing currency value, which underscores why transferring focus toward real assets is a common consumer response during times of high inflation.