Searchlight Innovations Inc T.SLX

RE: RE: Emotions

[Mineshack]

Curvature. In your post of 5/12/2011 @ 11:51:03 PM, you provided an example of money supply being doubled but, also put under a mattress. Economic activity came to a standstill because of the lack of money. You further explained “As you see you can double the money supply and in theory easily have deflation rather than inflation as it is the speed in which money changes hands that carries the most weight which is why you have had no inflation as the savings rate by the US consumer has increased.”

Judging by your recent response to farshooter, I understand then that you don’t see “deflation” in our economy as you say “there would have been had the feds not cranked up the printing presses to increase the money supply”.

I also understand now that you see an expansion of economic activity as ‘inflation’ and a contraction as ‘deflation’. The velocity of money or the frequency that it changes hands is how you determine if we’re experiencing inflation or deflation. I think this qualifies as a third economic definition of inflation and deflation and I suspect that it is more closely aligned with how the fed references these two words. It is in contrast though to the general public’s understanding of rising prices or ‘price inflation’. It also contrasts an increase in the money supply which is ‘monetary inflation’.

Thank you for making an effort to help me understand this. I will consider your view point in the future whenever I hear the Bernank cry ‘deflation’ as unemployment increases while our dollars continue to buy less.

 

 

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mineshack

 

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