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|User Info||M1 Multiplier goes BELOW 1.0 - WTF??; entered at 2009-02-06 14:29:03|
Registered: 2007-09-06 Peon hell
I think passivesf has a point though-- history seems replete with examples where a "depression" (not a Depression ;) leads to an episode of outrageous inflation, if not outright political and currency failure. It only makes sense to me because at a certain point hoarded money will come out and buy. At a point, that buying will lead to higher velocity and higher prices and...|
Thank you Lera. I believe what is happening is akin to Nothing's reference to the Depression and reset. The Depression was not a reset but was merely a ----- (I can't think of the word- ).
A reprieve, imho.
Money Velocity can only hit zero if either money supply goes to infinity, or if GDP goes to zero. I could possibly see GDP going to zero, but it's pretty extreme. The central bankers get hives if GDP contracts by 10%. GDP going to zero would send them all to an early grave (perhaps not a bad thing then). You can see why they're in such a scramble to get this 'stimulus' money and push it out into the system.
I don't quite understand your assertion in mathematical terms.
Money supply could stay positive non-zero and velocity goes to zero. Its called currency failure.