There is a (mass) psychological component to it as well. If people come to believe that inflation will continue for some time, they will spend their money faster, which increases monetary velocity, and leads to further price increases. Now consider that the velocity of money has been near an all-time low since the start of the pandemic...
There is a (mass) psychological component to it as well. If people come to believe that inflation will continue for some time, they will spend their money faster, which increases monetary velocity, and leads to further price increases. Now consider that the velocity of money has been near an all-time low since the start of the pandemic...
Yes, agreed. Velocity is a critical component. Excellent point about slow velocity during the pandemice. So lots of money creation during/ongoing coupled with higher velocity now will lead to massive inflation. (Especially if people are concerned about inflation and want to buy before prices go up!)
There is a (mass) psychological component to it as well. If people come to believe that inflation will continue for some time, they will spend their money faster, which increases monetary velocity, and leads to further price increases. Now consider that the velocity of money has been near an all-time low since the start of the pandemic...
Yes, agreed. Velocity is a critical component. Excellent point about slow velocity during the pandemice. So lots of money creation during/ongoing coupled with higher velocity now will lead to massive inflation. (Especially if people are concerned about inflation and want to buy before prices go up!)