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Thread: Deflation Precedes Hyperinflation-Long Answer

  1. #21

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    Very interesting read.

    I have a difficult time with this statement though.

    "Velocity is the speed at which money changes hands. When demand for the money is high, money changes hands more slowly, and velocity is low. When demand for the money is low, velocity is high."

    It just seems to be backwards.

    If demand for money is high, shouldn't the velocity, the speed at which money changes hands, be high and not low? If money moves more quickly with demand then that is like creating extra money to support the extra activity?
    Drambuie, The Golden Elixir !

  2. #22

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    Quote Originally Posted by Drambuie View Post
    Very interesting read.

    I have a difficult time with this statement though.

    "Velocity is the speed at which money changes hands. When demand for the money is high, money changes hands more slowly, and velocity is low. When demand for the money is low, velocity is high."

    It just seems to be backwards.

    If demand for money is high, shouldn't the velocity, the speed at which money changes hands, be high and not low? If money moves more quickly with demand then that is like creating extra money to support the extra activity?
    I think when the demand for money is high, it means that you want to hold on to the money and would only part with it when you absolutely have to. This reluctance to spend precious money gives rise to a low velocity.

  3. #23

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    Quote Originally Posted by Will Wong View Post
    I think when the demand for money is high, it means that you want to hold on to the money and would only part with it when you absolutely have to. This reluctance to spend precious money gives rise to a low velocity.
    Now it makes sense.

    Noted and thanks,
    Drambuie, The Golden Elixir !

  4. #24

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    OP

    Let me ask a very simple question and why we stack ( for the most part ).

    Fiat fails or we see hyper inflation take affect, high credit rates etc.

    What do YOU believe will happen with gold, immediate jump or slow steady increase?

    Feel free to answer in length, youre quite a pleasure to read

  5. #25

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    Quote Originally Posted by Drambuie View Post
    Very interesting read.

    I have a difficult time with this statement though.

    "Velocity is the speed at which money changes hands. When demand for the money is high, money changes hands more slowly, and velocity is low. When demand for the money is low, velocity is high."

    It just seems to be backwards.

    If demand for money is high, shouldn't the velocity, the speed at which money changes hands, be high and not low? If money moves more quickly with demand then that is like creating extra money to support the extra activity?
    Demand for the money-causes people to hang onto the money: thereby decreasing velocity. If hyperinflation occurs-people will not be able to get rid of the money fast enough since it's purchasing power would change by the hour. Velocity would increase-people would spend it as soon as they got it-or they would risk it becoming worthless.

    Velocity is low right now because people are not spending-they demand the dollars by rejecting purchases.

    Rest assured that this too shall pass and velocity will increase to breakneck speed. Velocity will cause gold and silver to go parabolic.

    I hope that this has answered your question.

  6. #26

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    Answered very well !

    Most interesting read ! Very Enlightning ! Thank You.

    Quote Originally Posted by lubbad View Post
    Demand for the money-causes people to hang onto the money: thereby decreasing velocity. If hyperinflation occurs-people will not be able to get rid of the money fast enough since it's purchasing power would change by the hour. Velocity would increase-people would spend it as soon as they got it-or they would risk it becoming worthless.

    Velocity is low right now because people are not spending-they demand the dollars by rejecting purchases.

    Rest assured that this too shall pass and velocity will increase to breakneck speed. Velocity will cause gold and silver to go parabolic.

    I hope that this has answered your question.
    Drambuie, The Golden Elixir !

  7. #27

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    Thanks for the great perspective... wow!
    However, at this point in time I have trouble seeing the hyperinflation aspect.. I just see the "headfake" Which I do not see as fake.. Deflation.
    Yes, I admit to believing our economy depends on the boomers, whom are all spending less and retiring globally.

    Why will we not follow in Japan's footsteps? IMO most of the money printing is lost in the abyss of default.

    I am prepared for depression, (no debt, lots of liquid cash) with a hedge by holding PM's. (Which should increase in value after the depression (10 years or so)

    I am screwed if we have hyper inflation instead.. I should be in debt up to my ears, have no cash and all PM's.)

    I love PM's I do not want to feel deflation is real, but I just do not see that printing for the last few years has caused much inflation at all, let alone hyper inflation. Keeping in mind the next group of politicians in the USA is likely to be "tea party" which if they keep their word they will not want to print, and reduce public services, which I see speeding up deflation, NOT triggering hyperinflation..

    I do not feel the writing is on the wall, for either hyperinflation or depression...yet...... maybe soon.

    E
    Last edited by Element; 09-28-2011 at 07:03 PM.

  8. #28

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    Quote Originally Posted by lubbad View Post
    Rest assured that this too shall pass and velocity will increase to breakneck speed. Velocity will cause gold and silver to go parabolic.

    I hope that this has answered your question.
    It would be so nice if you would be brave enough to hazard a guess as to when this velocity will increase to breakneck speed.

    And, I appreciate the clarity of your posts. I am passing them along to family and friends, hoping they will get safe!

  9. #29

    Default Gold ?

    If fiat were to become obsolete and a new currency to replace it wouldn't the market price of gold change to the new currency as well possibly giving it a new lower price even though the demand is there. Saying as the POG would reset with the new currency?

  10. #30
    Join Date
    Sep 2009
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    3,145

    Default

    The end is rapidly approaching. I will admit I am getting scared.

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