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Subject:  Re: YTM vs. CAGR Date:  12/3/2009  8:14 PM
Author:  richinaz Number:  29329 of 36398

This probably doesn't add much to the discussion but it isn't just too much money, but the money has to be spent. People often refer to the velocity of money. Currently there seems to be excess money being put into the economy but IMO it doesn't seem to be circulating very much. People are saving more to try to make up for their losses and banks are trying to prop up their financial position.

M V = P Y

where M is the money stock, V is the velocity of circulation, P is the overall price level, and Y is the level of output, to the equation for the inflation rate:

Inflation (in % per year) = Money Growth (in % per year) + Velocity Growth (in % per year) - Output Growth (in % per year)

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