3 ms·

I think it's particularly important to consider the velocity of money. When you consider that inflation is due to the change in (velocity of money * money suppl

by ummonk 7y ago

I think it's particularly important to consider the velocity of money. When you consider that inflation is due to the change in (velocity of money * money supply / economic production), it's important to remember that even as economic production goes down, the velocity of money arguably goes down even faster as e.g. rent and mortgage payments are deferred, bill payments are deferred, etc. So, the government has to expand the money supply to keep money flowing due to the decrease in velocity. One of the issues though is that asset prices are not dependent on the velocity of money - asset prices are roughly proportional to (money supply / aggregate assets), so while printing money won't necessarily drive inflation, it does drive asset prices up.

H8crilA 7y ago
The velocity of money (a terrible name IMHO) can be described as follows: how correct is the "more money = more inflation" statement in our current environment? In particular if it's low then more money != more inflation. And yes, we've had terrible inflation in financial markets.
logicchains 7y ago
>asset prices are roughly proportional to (money supply / aggregate assets), so while printing money won't necessarily drive inflation, it does drive asset prices up. Asset price inflation doesn't count as inflation?
- bob33212 7y ago
  A lot of people think of inflation as the consumer price index. ( Gas, bread, cars, toasters, etc) if those go up it puts pressure on wages because people cannot afford to live on existing wages at a certain level. The price of collectibles like rare art or comic books could go up or down a lot but the general economy doesn't care about those assets.
  - take_a_breath 7y ago
    The point isn’t about what you think the economy “cares about”. You mention commodity products which are a part of the picture, but they are all depreciating assets. In the end, there is an increased amount of money in the system. That money is looking for returns. Investors flood into the asset classes where they think they can find returns. This means collectibles increase in prices, but other (more common) assets like education, housing, and stocks have also increase considerably.

by ummonk 7y ago

H8crilA 7y ago

The velocity of money (a terrible name IMHO) can be described as follows: how correct is the "more money = more inflation" statement in our current environment? In particular if it's low then more money != more inflation. And yes, we've had terrible inflation in financial markets.

logicchains 7y ago

>asset prices are roughly proportional to (money supply / aggregate assets), so while printing money won't necessarily drive inflation, it does drive asset prices up. Asset price inflation doesn't count as inflation?

bob33212 7y ago
A lot of people think of inflation as the consumer price index. ( Gas, bread, cars, toasters, etc) if those go up it puts pressure on wages because people cannot afford to live on existing wages at a certain level. The price of collectibles like rare art or comic books could go up or down a lot but the general economy doesn't care about those assets.
- take_a_breath 7y ago
  The point isn’t about what you think the economy “cares about”. You mention commodity products which are a part of the picture, but they are all depreciating assets. In the end, there is an increased amount of money in the system. That money is looking for returns. Investors flood into the asset classes where they think they can find returns. This means collectibles increase in prices, but other (more common) assets like education, housing, and stocks have also increase considerably.