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Visualizing the Vanishing Money Velocity Vortex
by Bruno de Landevoisin @ StealthFlation
Having recklesly impaired the original clean source of healthy naturally effervescent American spring water abundantly spouting up from the bedrock below, the misguided monetary authorities have dangerously attempted to artificially inseminate the clouds above, in the hopes of drenching the parched U.S. soil with torrential rain, so as to generate their much heralded and forever promised green shoots. Regrettably for us all, when these artificially seeded clouds eventually do burst, they will produce nothing but the toxic inflationary rains of StealthFlation.
Under the imposition of StealthFlation, the Velocity of Money lies dormant while increasing Inflationary risks build below the surface.
The inflationary risks are deliberately concealed and remain latent due to the synthetic suppression of determinant free capital marlet forces. However, the grossly excessive supply of money has definitively been created, and it will debase the currency via inflation, it's just a matter of time.
When an economy is healthy, there is much buying and selling and money tends to move around quite swiftly. Unfortunately, the U.S. economy is manifesting the precise opposite of that these days. In fact, the velocity of M1 & M2 has fallen to near all-time record lows. This is a very serious sign that the underlying economy has entered a period of extreme stagnation.
In its infinite wisdom, the Federal Reserve has been attempting to counter this economic standstill by absolutely flooding the financial system with new money. As it always does, this has created monumental financial and fixed asset bubbles, however, it has not addressed what is fundamentally and structurally wrong with our economy. On a very basic level, the amount of real economic activity that we are witnessing is not anywhere near where it should be, and the anemic flow of money through our economy is proof certain of the ongoing dilemma.
Clearly the transmission mechanism between the relentless synthetic origination of fresh money by the monetary miracle men and the velocity at which that new money is circulating in the real underlying economy on the ground is completely disconnected, FUBAR. Why is this? Well, it’s really not that difficult to comprehend.
First of all, much of the supposed economic activity generated today is not being driven from the the bottom up by the healthy deployment of excess savings naturally created from genuine self-sustaining productive economic activity at the fundamental level, but rather in an unnatural fashion, force fed from the top down via the easy street ZIRP/QE induced debt financing incessantly being encouraged by our misguided megalomaniac monetary authorities.
Perhaps even more malignant, the largest capital market of them all, namely the U.S. bond market has been put down by the Fed’s activist zero bound anesthesiologist. Thus, the utterly comatose American treasury market is no longer facilitating the natural growth of traditional savings income streams generated via secure interest bearing accounts and prudential savings products throughout the financial system’s depository structure. In short, the healthy income flows constructively generated from legitimate savings produced from genuine economic activity, namely people going to work every day, has been effectively terminated by these wizards of wanton monetary policy at the wayward central bank.
Let's face it, if the major pension funds can't generate 5-6% per year holding conservative debt instruments in order to meet their massive obligations, they are up a creek without a paddle. They require substantive returns in order to remain solvent. The Fed understands this all too well, they are most concerned on that score, and so should you be.
Having thoroughly shut down the sound, well established and effectives channels of capital formation, which have consistently engendered bona fide and constructive growth over the years through the virtuous avenues of productive savings, the foolish authorities have left themselves utterly hamstrung with only one risky road to travel down. Indeed, now that they have totally cracked the transmission on our fiscally busted and broken down American bus, they have become 100% reliant on the equity market to drive their top fuel funds into the U.S. economy via the wealth effect. Pedal to the metal at 2,000 SPX mph. Make no mistake my friends, we are on a crash course from hell, and we will hit the wall.
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All those money creation methods you just mentioned are just the different outward appearances of the fractional reserve system in which banks(and central bank reserve system) operate on.
I actually don't see where you are disagreeing with me, because you are just describing what I stated, the only difference being you are describing the outward appearance of money creation whilst I stated the core principle that underlies it.
The money creation methods you mentioned is exactly how fractional reserves operate,
"because your bank don't need to have 10 dollars to loan you 10 dollars, so it is seen by the public that money is created when you take out a loan at a commercial bank. Hence, commercial banks = money creators".
That's the common view.
But it is not entirely accurate.
Just because money creation is seen to happen at the commercial bank level does not mean it is not both known and still controlled by central banks.
That's exactly how 'fractional reserve banking' works, and I mentioned it explicitly. The reserve ratio is the leverage multiplier at which commercial banks are allowed to 'create money', so you can see and follow the simplified economics indoctrination at a university of your choice that 'money is created when I take out a loan' and come to the believe that commercial banks create money when in fact it is always controlled and decided by central banks.
Why do you even think central banks exists in the first place?
...and no, they are not here to rob you, though they might be doing that at the moment as a side-job, but that's not the primary function for their existence (though the US Fed is a slight different case to the other central banks, but that's another topic).
There should be no Goddamned FED. Government should spend non-interest bearing money into circulation itself, as necessary to perform its constitutionally authorized functions.
Consumption taxes must replace unconstitutional "income" taxes, and all governmental agencies must abide by the constitution.
All legislation must pass constutional examination under the concept of "original intent".
The constitutionally destructive judicial construct of "stare decisis" must be forever disallowed in law. All constutional examnations of legislation and executive orders must be made under the exegesis of "original intent". Constitutional rejection of legislation and/or executive orders are nullities and non-existent in law.
Public referendums by popular vote held under tightly held procedures can be use to override rogue legislative, executive, and judicial decisions.
Term limits of no more than 10 years must be imposed upon ALL governmental positions, both appointed and elective.
Not that I necessarily disagree with the spirit of your post, but remember that the Supreme Court, per the Constitution, interprets the Constitution. Therefor, ipso facto, if the SC says it's so, it is so. Try playing the cards you are dealt, King Hootowl.
Bank of England recently fessed up that this myth of money creation is not true, Fed may do the same someday but I doubt it. Banks create money, they don't just multiply it. Headline inflation of course way understates real inflation, ask anyone who eats, drives a car, lives in a house, educates children, goes to a hospital etc. What we have today is a gargantuan tug-of-war between powerful, secular deflationary forces (internet, globalization, robots, technology) and equally powerful orgiastic money printing.
It means that little new fiat currency is being created because no one is taking on any more debt, or most people and/or businesses are paying down their debt thus eliminating currency from the system.
Either way it's deflationary.
The U.S. Government wouldn't have to ever spend another deficit penny to face the certainty of insolvency and bankruptcy.
Actually, if it doesn't raise the debt limit regularly, it would be insolvent immediately, because it couldn't even pay the exponentially-increasing-compounding-interest on the existing debt without borrowing the money to do so.
The U.S. Government has been insolvent and bankrupt for many, many years. When the EBT allowances and the Section 8 rent subsidies are no longer able to keep the parasitic Ebonic Plague and the new 15 to 20 million Latino invader/parasites fed and sheltered all hell is going to break loose.
Congratulations to all the progressive jihadists and faux-Hebrew moneysuckers out there who have finally brought us to ruin. I hope you are the first in line when the beheadings begin.
And where are you in the beheading line?
The inflationary risks are sealth due to the synthetically supressed rates of interest, which can not be sustained indefinately. However, the excess supply of money has difinitively been created, and it will debase the dollar via inflation, just a matter of time now.
They can't control the velocity of money. Most people only spend on what they absolutely cannot live without these days - food, airfares, energy. Notice that these are the only areas we see the inflation beginning to soar.
We are in the early stages of the endgame, a controlled incremental collapse of society through economic means.
When ISIS detonates several dirty bombs simultaneously in multiple major metropolitan areas within the USA, you can forget the "incremental" part. Faith in US credit will be abolished, and all our fiat will be good for will be to recite the motto "in god we trust".
Contrary to being incompetent, the Cloward-Piven strategy of American destruction is being implemented excellently by President Valerie Jarrett and her gay errand boy Barack Ovomit.....and of course the progressive jihadist cabal of antiamerican muscums and darkly demented Sunsteinian/Sorosian academicians.
Secession and federal reset very soon or it will be too late.
Starve The Beast.
Wrong TVP, It will also be used to wipe your ass and start fires.
They can't control the velocity of money.
What the ..? Credit is money.
I think I'll upvote myself for understanding the correlation between credit and velocity. Here goes...
Um, I believe they are busy BUYING up credit. So yes, creation of NEW CREDIT increases the velocity, and the opposite is true.
Yes, but who controls ISIS? It is said that it is just a convenient front for the US and Israel (or substitute banker funded and armed mercenaries if you like) fiat bogeymen.
Anything ISIS does is a false flag by definition.
The Mujahideen, Al Qaeda and ISIS are one in the same CIA created group. The name "Al Qaeda" came from the CIA as that was what they called their database of anti-Soviet Afghan freedom fighters, at that time called "Mujahideen". Give the CIA a few billion dollars and they can rebrand Al Qaeda into ISIS. More appropriately the official name should be "AL- CIAEDA!
Oh, and guess who headed up the Mujahideen. Yes, our old CIA asset "Osama Bin Laden". You know the one that Seal Team 6 killed again. Some of the team let out that the whole thing was a hoax and the feds blew up their helicopter with nearly all aboard.
Looks like we have a quickening here and a huge black ops false flag is on the horizon utilizing their newly branded ISIS group. These are one trick ponies these alphabet soup tyrants. Gallows await them all!!!!!!!
Tuco
Gallows await us all. I'm sorry you don't see that.
Isn't it interesting that just when the public was pushing back on the 'police-state' tactics of government, this ISIS thing mysteriously emerges from out of nowhere, super-trained and super-armed. Hmmmm, what a coincidence.
Bingo!!!!!!! +1000 What we need now is protection not civil liberties. It is for our own good!
FUBAR for sure.
That's what you get when you sell out your production base and your populace for the sake of banks and banksters.
Let's not forget our precious hedge fund wizards!
I personally find these posts so much easier to read on Slope!
So set up a projector, point it at your forehead, and watch it in the mirror.
Well, Hi there, Tim!
Slope is nice enough and I do go there from time to time.
I do note that postings and commentary from ZeroHedge cntributors and commenters find their way to Slope on a consistent basis while the reciprocal is not true.
ZeroHedge is also a good site although it has a different vibe, different rules of conduct, and attracts a different clientele.
I don't think that coming into Zerohedge and promoting Slope is going to be met with any more or less condescention than any other unwelcome advertising, shilling, spamming, etc..
So, how about you learn to respect ZeroHedge and it's Fight Club extremist bent?
In return we will overlook this little faux pas of yours and we let you slink off without forcing you to follow the local rules which govern this joint. You won't be forced to fight in the ring today against whichever frustrated angry fuck happens want a piece of your ass for no real reason if not just to prove their manhood...
You can thank me later for stepping in and helping you out like this. After all; we are in this together, aren't we?
See you soon @ slope.
Cheers!
The Throxx Of Vron
I note that we have the same ZH birthday.
Doncha just love Fight Club?
You ain't really had yer ass whooped here until Tyler rips yer face off for what you thought was a cool idea.
+100 throxx for civil response
Yes, very cool. What the hell is slope?
.......
<<Clearly the transmission mechanism between the relentless synthetic origination of fresh money by the monetary miracle men and the velocity at which that new money is circulating in the real underlying economy on the ground is completely disconnected, FUBAR. Why is this? Well, it’s really not that difficult to comprehend. First of all, much of the supposed economic activity generated today is not being driven from the the bottom up by the healthy deployment of excess savings naturally created from genuine self-sustaining productive economic activity on the ground, but rather in an unnatural fashion, force fed from the top down via the easy street ZIRP/QE induced debt financing incessantly being encouraged by our misguided megalomaniac monetary authorities. Perhaps even more malignant, the largest capital market of them all, namely the U.S. bond market has been put down by the Fed’s activist zero bound anesthesiologist. Thus, the utterly comatose American treasury market is no longer facilitating the natural growth of traditional savings income streams generated via secure interest bearing accounts and traditional savings products throughout the financial system’s depository structure. In short, the healthy income flows constructively generated from legitimate savings produced from genuine economic activity, namely people going to work every day, has been effectively terminated by these wizards of wanton monetary policy at the wayward central bank.>>
Hence, the rapidly decreasing relevance of the bank-fiat economy. PRODUCTIVITY will be the focus of the early 21st century (along with survival, probably). The productive economy is deserting conventional markets which have become criminal-run, which is why I believe we are in the early stages of hyperinflation. Productivity is always where the real economy is.