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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: RetiredNow who wrote (252057)6/5/2010 9:37:10 AM
From: neolibRead Replies (1) of 306849
 
but if M3 is tanking, their will be no inflation in the short run.

Yes, lots of people don't understand that velocity of money is a factor. The question is can the Fed reverse the quantity as the velocity picks up.

However, that does raise an interesting question. The Feds actions with the big banks not only greatly increased the quantity, but the banks decreased velocity at the same time. I wonder if the Feds could have instead devised tools to increase velocity but not quantity. People on average view the increase in quantity as bad (printing money = inflation) but don't understand the velocity enters the equation with the same footing. So policies which increase velocity might not be viewed as inflationary by the general population. I'm just wondering if there would be market psych reasons for trying to push the velocity lever rather than the quantity lever. I think the Feds view is that pushing the quantity up is the way to get velocity up. Perhaps more thought is need on how things might be done.
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