Peek At Inflation: Cool Checks That Lead To Recovery

By Keith Sellers

Inflation can be a at a standstill even if the government pumps boatloads of money into a sagging economy if and only if, the velocity of money is also passive and unmoving. Velocity of money is the frequency with which a dollar is spent for a certain amount of money over a given period of time.

If the velocity of money is at a standoff there is nothing to inflate. Even if a given stock market annihilates trillions of dollars as the stock market collapses and misguided government printing money to finance all the politicians ill-conceived paybacks to lobbyist, nothing inflationary will happen until the velocity of money accelerates.

The wacky Keynesian economic theory holds that one can "stimulate" the economy by deficit spending. Leveraging or stimulating the economy cannot work if the stimulus is via debt. You cannot spend your way out of in the hole liability by borrowing more money. This type of risk profile begins to look like a gigantic Ponzi game plan with the American taxpayer on the hook.

The government cannot print money out of thin air in order to solve the velocity of money dilemma. People are not spending their money in the marketplace because they are afraid. Apprehension makes them become more conservative in their buying habits.

Money is a standard of exchange arising out of people's savings. In an economy based on bartering, it would be impossible to exchange unequal items without an exchange benchmark. So, the government created a stable supply of money. If the velocity of money was stagnant and the supply of money enlarged, inflation would bring it into balance.

The federal government created a debt crisis, and consumer confidence will be low until that in the red obligations is paid off. Yet, even in a deflationary situation, the bottom will eventually be reached. The velocity of money will move along in time and the economy will be set to rights again.

For the time being, the government has greatly inflated the amount of money it generates. When the economy eventually takes off and the velocity of money improves, so inflation will also. As consumer confidence increases and all the extra printed money follows after a set number of services and goods, inflation will surge accordingly.

This is the issue: when will you realize that confidence and money velocity increases are taking place? Read the Wall Street Journal and other newspapers and sources known for their financial sections and check the Consumer Confidence Index's numbers. These numbers are known as ''leading indicators'' and reveal economic trends well before they are observed by hard data.

The other premier economic guides that show change before the economy changes are: the Producer Price Index (PPI), Employment Indicators, Retail Sales Index, the National Association of Purchasing Management Index (NAPM), Curable Goods Order report, Gross Domestic Product (GDP) reports, Consumer Price Index (CPI) reports, Employment Cost Index (ECI) and the Productivity Report which evaluated how much output is created by a unit of labor. Provided by Cool Checks - 31970

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