20191031-Why we haven't seen inflation?

Silver Report Uncut (The Crash in money velocity may have saved us from)

-Inflation is defined as too much money to buy the same set of goods.

-The question is why the inflation remains low when lots of US fiat were printed?    Between 2008-2013, the money supply grew 33% per year.   At the same time, the output of goods only grew 2% per year.   So why we didn’t see 33% inflation?

-A lot to do with the 『velocity of money』- it has been declining for quite some time.

-Whenever money velocity declines rapidly in a period of money supply expansion,  it  offsets the increase in money supply and that can lead to deflation instead of inflation.   The reason is the money that is being created is not circulated and used.  

-Velocity = Nominal GDP/Money Supply.   It’s usually being used to measure the economy strength or people’s willingness to use money.

-In a consumer driven economy, the more transactions that are being made, the more the money velocity increases.    Higher money velocity leads to more the economy expansion and vice versa.

-According to Fed, since the money velocity has been declining for 20 years, the GDP growth has not grown above 3%.    But once the money velocity stops declining or starts to increase, we will start to see inflation.

-Also with lower interest rate, the Fed wishes to stimulate economy by increasing demand.  Increasing demand is supposed to lead to an increase in money velocity.    However due to  high debt loads and the weak economic condition, people and companies hesitate to spend more money thus keeping the money velocity low.