11-Mar-15 World View -- Europe, America, China economies all continue in deflationary spiral

[John]

11-Mar-15 World View -- Europe, America, China economies all continue in deflationary spiral


Iran elects hardliner to head Assembly of Experts

** 11-Mar-15 World View -- Europe, America, China economies all continue in deflationary spiral
** http://www.generationaldynamics.com/pg/ ... tm#e150311



Contents:
Iran elects hardliner to head Assembly of Experts
Greece's deflationary spiral continues with consumer prices down 2.2%
European Central Bank tries desperate measure to fight deflation


Keys:
Generational Dynamics, Iran, Ayatollah Mohammad Yazdi,
Assembly of Experts, Ayatollah Seyed Ali Khamenei,
eurozone, consumer price index, European Central Bank

[vincecate]

The size of the money supply is set by monetary policy, but it turns out that the velocity of money is set by generational changes.

The velocity of money depends on both the interest rates and the inflation rate. As interest rates and/or inflation rates go up the velocity of money goes up.


Here is some data showing dependence on interest rate:

http://www.hussmanfunds.com/wmc/wmc110124.htm

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In every case of hyperinflation the velocity goes up as the inflation rate goes up.

If you think about it it makes sense. If money is not earning interest and not losing value, there is no hurry to spend it or get it to a bank. The more interest it earns or the faster it loses value the more incentive there is to move the money along fast.