November 28, 2012 at 12:23 pm #17386
I too have been trying to work out why we haven’t seen all the price inflation we might normally expect. Does the significant decline in the “velocity of money” have anything to do with that? (I’m no expert, but looking at what Professor Herbener wrote, I surmise that the decline in the velocity of money is connected to the demand to hold money).
If the velocity of money were to return to the normal trend line* would we start to see price inflation increase?
*Maybe there is no “normal trend line” for monetary velocity anymore; from what I gather it has gyrated since about the mid 80s.