Re:Stock buybacks are dangerous for the economy
by JumpCrisscross on Tuesday March 17, 2020 @03:02PM
(#22608817)
> What's preventing hyperinflation at this point?
Crashing money velocity and vanishing credit. Inflation is a function of money supply and money velocity. Money supply is central bank money plus private money (e.g. checking account deposits) plus credit.
Demand destruction, like what we're seeing now, causes money velocity to plummet. That affects lending, which causes credit to plummet. (If we got into a credit crisis, it would cause private money to plummet.)
The increase in central bank money simply paled, even in 2008, compared to the destruction of credit and reduction of money velocity. As such, we actually experienced deflation while the central-bank money supply expanded. Because the total money supply, relative to the economy, contracted.
Crashing money velocity and vanishing credit. Inflation is a function of money supply and money velocity. Money supply is central bank money plus private money (e.g. checking account deposits) plus credit.
Demand destruction, like what we're seeing now, causes money velocity to plummet. That affects lending, which causes credit to plummet. (If we got into a credit crisis, it would cause private money to plummet.)
The increase in central bank money simply paled, even in 2008, compared to the destruction of credit and reduction of money velocity. As such, we actually experienced deflation while the central-bank money supply expanded. Because the total money supply, relative to the economy, contracted.