The printing press is full of firepower, and the broad money is more than 270 trillion, how can it be deflationary Where does the money go?
Recently, the broad money supply has continued to climb to more than $270 trillion, which is far more than at any time in the past. However, it is surprising that despite the huge money supply, we are facing deflation. What the hell is going on? Where is the money going? Let's reveal the secret together!
First, let's review the concepts of inflation and deflation. Inflation refers to an increase in the money supply, which leads to an increase in the price of goods and services, while deflation, on the contrary, refers to a decrease in the money supply, resulting in a decrease in the price of goods and services. According to economic principles, an increase in the money supply leads to inflation, while a decrease in the money supply leads to deflation. However, in the current situation, broad money has increased, but we are facing deflation, which has caused confusion among the general public.
So why does deflation occur when the money supply increases? Experts believe that this may be related to the slowdown in the circulation of money. Circulating velocity refers to the speed at which money moves through economic activity, usually measured by the ratio of GDP to the broad money supply. If the rate of circulation slows, even if the money supply increases, the growth rate of overall economic activity will slow down, leading to the emergence of deflation.
In addition, where the money goes is also a major cause of deflation. In recent years, it is not difficult to find that with the rapid development of the economy and consumption upgrading, a large amount of funds have flowed to a few sectors such as the real estate field, while the development of other industries is relatively lagging behind. This concentration of funds in a few sectors has led to structural imbalances in the economy, resulting in oversupply in some industries and falling prices, thus driving overall deflation.
In addition, in the context of global economic instability, capital outflow is also one of the important factors leading to deflation. Due to the uncertainty of the global economic situation, many investors have shifted their funds to safe-haven assets or overseas markets, resulting in a reduction in the supply of local money, which in turn has triggered deflation.
Experts have proposed some countermeasures to the current deflationary situation. First of all, we should strengthen the adjustment of fiscal policy, implement a proactive fiscal policy, increase public investment, and promote economic growth. Second, we should pay attention to economic restructuring, optimize resource allocation, and encourage the development of emerging industries. In addition, supervision should be strengthened to avoid the flow of funds to a small number of sectors and promote the stable and healthy development of the economy.
To sum up, despite the full fire of the printing press and the broad money supply climbing to more than 270 trillion, we are facing the dilemma of deflation. This phenomenon may be related to factors such as the slowdown in the circulation of money, the flow of money to a few sectors, and the outflow of funds. In order to solve the problem of deflation, we need to strengthen policy adjustment and economic restructuring to promote stable and healthy economic development. Let's work together and do our part to solve the problem of deflation!