Why is inflation relatively low despite large increases in the money supply? Money velocity has decreased.
The author gives an equation and examples examples.
Confirmation from Zero Hedge.
Why Inflation Is Relatively Low
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Why is inflation relatively low despite large increases in the money supply? Money velocity has decreased.
The author gives an equation and examples examples.
Confirmation from Zero Hedge.
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5 responses to “Why Inflation Is Relatively Low”
Or as one person I heard put it. “Printing money doesn’t really cause inflation; as long as it goes in the right pockets.”
I think I now understand the honestly-held belief of the Keynsian/Marxists that it is impossible to consider government spending cuts.
What they have built is the economic equivalent of a dead-man switch.
One technique for reducing the velocity of money is to remove it from the private economy and spend it as government instead. We know that the “multiplier” for government spending is less than 1–which is basically equivalent to reducing the velocity of money.
A low velocity of money is essential to this big-government-dominated economy’s continued functioning (to the extent it’s actually still functioning).
Therefore, viewed from this angle, reducing government spending would be a form of economic suicide–a letting-go of the dead-man switch and triggering the very hyperinflation which is, according to the article, “mythical.”
This is all of course DEEPLY irresponsible bordering on immoral, even if your interest is actually “the greatest good for the greatest number.” But it is comprehensible.
filbert,
You do have it right.
Will,
Correct also.
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Note – low inflation has been a feature of economic policy since the Federal Reserve. Keeps the money invested.
What about the actual inflation rate, instead of the official inflation rate?
In other words, when are food prices going to show some volatility?
Alan,
Supply and Demand?