Velocity of Money

[68Camaro]

I think you're right - by the time it is widely recognized that the genie is out of the bottle, the velocity will quickly go to huge numbers and it will be too late for anyone to react and change strategy. And (as happens during hyper events) there will actually be a shortage of money for a time, until they start printing those $1000 bills again. Then $100,000. Then $1,000,000. etc.

[SilverEye]

A big chunk of the Baby Boomers are starting to retire, and the rest are thinking about it. There are millions of 50+ who are unemployed and gave up the job search and decided to scrimp along until they can collect Social Security. That's a lot of people who used to spend a lot of money on cars and gas and eating out for lunch and buying work clothes and celebrating promotions, who now don't. Lots of them are no longer paying for their kids' college (see student loan increases for the last decade). Stay at home, don't need the gardener, mow your own lawn.

The only way out I see is to open the immigration floodgates, get some young people in here making money and spending money, and kick the can along a few more decades. I don't know if I'm for that or against it, but there's not many other options to pay for all these old people.

[Lemon Thrower]

Once prices start to rise, and people realize the value of their currency is decreasing, they will rush to buy anything. It is only then that the velocity of money accelerates out of control.
There are stories from 1929 Germany of workers demanding to be paid at lunch time, so that they could go out to spend their paychecks before prices went up further.
The velocity of currency is just a way to measure the demand for that currency. There is no way that the Fed Reserve can pull back on supply, once the demand craters.
Usually, just the opposite happens, as the Gov't needs more money too as salaries and expenses increase.

this is true. however, to some extent we are in deflation now that the govt is combatting by printing. its difficult to tell if its going to work. from the govts view, they don't even need to create inflation, just the expectation of inflation. for example, i have been putting off buying a new car. we're at 150,000 miles and still going strong. will probably get one this fall. however, if i thought the price was going to be 10%-15% higher than today, i would buy today. so the fed is going to try to create this impression, which may be a false one. you need to think about large purchases you have upcoming, and have a plan about when to buy them. the last thing you want to do is make decisions out of emotions rather than a plan.

[SilverEye]

however, to some extent we are in deflation now that the govt is combatting by printing.

Yes. But the gov't is going to overshoot their target by a bunch. They always do. Nobody in the federal gov't seems to realize that on a national level, for a nation as big as the USA, there's a huge lead time. Policy that we implement now won't affect anything for years.

It's like adjusting a shower in an unfamiliar hotel. Hmm, it's a little cold, crank up the heat, nothing yet, crank it up more, oops too hot, turn it down, ouch way too hot!, turn it down more, oops a little cold, turn it up, still too cold, turn it up more, oops too hot..

Inflation is coming. It has to. But who knows when, and what might happen in the short term. Physical holdings only. Do not buy leveraged PM's.

"The market can stay irrational longer than you can stay solvent."

[commoncents]

Since all my copper pennies and nickels are wrapped and taped into boxes, their velocity is zero. Oops, could it be my fault ? <grin>

When the combination of national situation and the public's awareness of the situation changes, the velocity of money can change in one morning. On December 7, 1941 the velocity of money probably changed a whole lot in an hour or two. The problem is such events are hard to predict and the public's response to them also can be hard to predict. I expect 'gusty' weather and changeable wind direction.

[AGCoinHunter]

Stagflation is coming...or better yet, its here.