> Isn't velocity of money a question in this though?
No, that's pretty much irrelevant. I was giving an example of someone digging a hole to dump their money in. That money's velocity would be pretty much zero. The central bank will just print more money to make up the shortfall.
It's the same, but less extreme, if velocity falls to eg half of what it was instead of zero: the central bank notices that inflation is below target, and prints more money.
The net result is that the overall nominal (!) spending in the economy is whatever the central bank wants it to be. For that total nominal (!) spending figure, decisions by individual economic actors are pretty much irrelevant; because there's a control system with a negative feedback loop.
No, that's pretty much irrelevant. I was giving an example of someone digging a hole to dump their money in. That money's velocity would be pretty much zero. The central bank will just print more money to make up the shortfall.
It's the same, but less extreme, if velocity falls to eg half of what it was instead of zero: the central bank notices that inflation is below target, and prints more money.
The net result is that the overall nominal (!) spending in the economy is whatever the central bank wants it to be. For that total nominal (!) spending figure, decisions by individual economic actors are pretty much irrelevant; because there's a control system with a negative feedback loop.