There is a widespread lack of understanding among economists and investors regarding what actually drives changes in inflation rates over the short and long term. The conflation between the price of individual prices and the general price level, as well as the focus on aggregate demand, has led to a high degree of misinformation regarding what really drives inflation rates. In this article, we hope to provide clarity on the subject, explaining a number of important concepts:
- Why the supply of money relative to GDP determines long-term inflation trends.
- Why the demand for money explains short-term inflation changes.
- Why declining velocity of money reflects rising money demand and the potential for high future inflation.
- Why short-term inflation trends tend to reflect financial market risk appetite.
- Why recessions tend to be disinflationary in developed economies.
- Why the focus on aggregate demand has led economists to mistakenly believe high inflation is positive
You know how much you paid for your home, and you likely factor the work you’ve done and the memories you’ve made there into your idea of what it’s worth. But while your home may be your castle, your personal feelings toward the property and even how much you paid for it a few years ago play no part in the value of your home today.
In short, a house’s value is based on the amount the property would likely sell for if it went on the market.
Why Should You Know the Value of Your Home?
You should have a grasp of the value of your home in a variety of situations: if you’re getting ready to sell your house, looking to refinance your mortgage or buying a new homeowners insurance policy, for example.
For a better understanding of what your home’s value means, how it may change over