@MaichBlack

I believe we have beaten this horse enough and ask to sign of too. Before I too, here are the answers to a few of your questions:

1. You challenge me to name a product that has been affected by the change in velocity of money. I already gave the example of sugar prices in the country, a good that used to be a luxury but has rapidly become an inelastic necessity.

2. You insist your cucu buying sugar weekly instead of monthly has no effect on prices - yes it does a) when she used to receive money via an unpredictable schedule she would sometimes forgo sugar (and no, don't argue that she would simply buy more when the money finally arrived) b) change in the purchase cycle has an effect on an industry like sugar production which is in turn dependent on inelastic production factors like weather and fixed plant.

3. There is one reason why Governor Ndungu would ignore the inflation causing effect of a variation in money velocity - the fact that with time the market will adjust to meet the demand occurring out of phase. But it takes time.

4. Finally markets normally respond to signals like demand which in turn are indicated by change in prices - not the other way round. These price changes are not always caused by increased production costs. Sometimes they are caused by a temporary shortage owing to inefficiencies in the demand/supply pipeline. As a result too much money ends up chasing too few goods - in other words, inflation.

P.S. As for that crack about smooth roads causing accidents, they do. It is one of the prices we pay for having good roads - the benefit may ultimately outweigh the price but it does not discount it. Just like we were told, for years, that new technology does not cause loss in jobs. Now economists finally come around to the fact that in fact it does. M-pesa causes temporary inflation, should we therefore do without it it? NO.

Have a good day

Economics 202. I'm in class here, awesome.

@genghis. Deal and QW would cause some very nasty fights on this thread where there are divergent views, hauwajui vizuri. (wazua banter)

Btw its true. When i have cash on mpesa i have a tendency to spend more on airtime than when i don't.

Wakiskia hivyo si watatupa their two cents chap chap. Naona the deal ameandika and I do support point 3 yake, I have fallen victim to that on many occassions. Aguytrying ur two cents?

my head is spinning.. and im horribly lost
but i just beg to ask.. whats the definition of inflation..?

then i ask.. has MPesa increased the goods or the amount of money...?

The only explanation is that Mpesa has probably taken money that was relatively hard to 'reach' from banks and 'banked' it within everybody's reach..
Too much liquid out here..

then again if i have 30K to spend in a month.. and it would take me 5 days to access the 30K as compared to 10days previously..does it mean i can purchase more goods? Its still my 30K

Why didnt this phenomena by MPesa hit during the earlier years?..only now..?

as VV puts it.. the effects of Mpesa should be very minimal to inflation.. unless MPESA agents are creating virtual money..

that brings me to the question.. float or no float.. can MPesa create virtual money..? i can give the guy 4K ask him to 'load' me 8K promising ill pay back the extra 4K immediately the deal goes through.