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Strategies & Market Trends : The Ego Forum -- Ignore unavailable to you. Want to Upgrade?

To: hubris33 who wrote (9698)	3/18/2011 2:11:32 PM
From: Amark$p	1 Recommendation Read Replies (1) \| Respond to of 12175

One rationale for velocity to increase significantly, is inflation expectations would change. That is, people expect to pay more near term for goods and services than now. So yes, higher inflation would get people exchanging their fiat $ to buy household items, food, and services; and gold and oil if they were investors... What you could surmise now is that people are using any extra cash flow to pay off debt. Thus, no velocity... Assuming people have fixed rate debt and higher inflation expectations, then they would prefer not to pay off debt (which would decrease relatively) but rather to purchase goods and services now at lower prices, than perceived higher prices in near term. There are other reasons velocity could rise, but this would be the key reason ==> inflation expectations.