AFMC - Velocity Of Money Is No Longer A Huge Inflation Factor

2024-07-16 07:30:00 ET

Summary

• Velocity of money - the speed at which money flows through the economy is often tied to speculation about the future of inflation.
• Today, small businesses are suffering the most pain of cost increases since larger enterprises have a lot more ability to get cheap funding.
• The faster money moves through the economy is sometimes tied to demand.
• It is logical to envision that huge government deficits will result in further inflation and increasing interest rates as the government generates new money without increases in real productive capacity.

Let's talk about the velocity of money! The speed at which money flows through the economy is often tied to speculation about the future of inflation. It may be important, but it is no longer a big factor when it comes to inflation. We have entered a cost-push inflationary cycle, and these tend to be self-feeding. This translates into more inflation ahead....

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