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Velocity of Money – Why It Is Important

How will the new Financial Reform Bill affect mortgage lending? Nobody knows yet; too complex. But we will keep you posted.

The Velocity of Money is very important because it explains why inflation is inevitable, and why we are so gun ho about today’s super low rates.

“Velocity” is how fast or how many times the money in our economy gets spent or “turns over”. The Gov’t and the Fed have recently pumped trillions of dollars into the economy, but there is currently no inflation.

The reason is all that money is just sitting idle. Banks are not lending, businesses are not investing, and consumers are not spending because they are all too worried about the economy and Gov’t policy.

Once all that money does start getting spent, loaned or circulated, inflation will set in. There is so much money out there that inflation will likely be bad. And bad inflation translates to sky-high interest rates.

This is why buying now and getting such low fixed rates is such a fantastic opportunity. Every “fence sitter” trying to time the bottom of market could well end up missing the opportunity of a lifetime.

Call Jay Voorhees at (925) 855-4491

Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646