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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Hawkmoon who wrote (102075)	9/16/2009 5:23:43 PM
From: Hawkmoon	Respond to of 116555

For those of you not acquainted with the concept of monetary velocity and how it impacts money supply and GDP, here's John Mauldin's article on it in .pdf format. I heartily recommend it as must read material (even if you disagree with the concept.. ;0) frontlinethoughts.com Hawk

To: Hawkmoon who wrote (102075)	9/16/2009 5:51:46 PM
From: Elroy Jetson	1 Recommendation Read Replies (1) \| Respond to of 116555

Every time the money supply expands due to additional loans: the total amount of money available to lend increases; the interest rate for money declines; the return earned by the borrower on borrowed money also declines. It's very likely you won't understand this today. In fact you may never be able to understand this. That's the way it is. It's just supply and demand. As the money supply increases relative to income, as debt increases, the value of money and it's interest rate declines. Likewise, every time the money supply declines due to the liquidation of loans through bankruptcy and foreclosure: the total amount of money available to lend decreases; the interest rate for money increases; the return earned by the borrower on borrowed money also increases.