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An Important Economic Indicator – Money Velocity – Crashes Far Worse than During the Great Depression
We noted 3 years ago that the velocity of money – an important economic indicator – is lower than during the Great Depression.
Things have gotten even worse since since then …
By way of background, the velocity of money is the rate at which people spend money.
In other words, it’s the speed at which a dollar moves from one person to the next through the economy.
The Federal Reserve Bank of St. Louis explains:
The velocity of money can be calculated as the ratio of nominal gross domestic product (GDP) to the money supply … which can be used to gauge the economy’s strength or people’s willingness to spend money. When there are more transactions being made throughout the economy, velocity increases, and the economy is likely to expand. The opposite is also true: Money velocity decreases when fewer transactions are being made; therefore the economy is likely to shrink.
The St. Louis Fed labels the velocity of money as “Gross Domestic Product/St. Louis Adjusted Monetary Base” … and provides the following data on the velocity of money between the start of the Great Depression and today (click any of the charts for larger version):
Here’s the money velocity right before the Great Depression hit:
Here’s the money velocity from the darkest point during the Great Depression:
Here’s the money velocity before the 2007-2008 crash started:
And here’s the money velocity from the most recent data from 2014:
Bottom line: The velocity of money has fallen much farther – and to much lower ultimate levels – than during the Great Depression.
Ouch …
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This is how TPTB flush cash from the shytstem and roll in 100% digital currency. They've been salivating over this for 40+ years.
Bow down to your owners you muthafukkerz. ;)
This is how you can have deflation and inflation at the same time - they have printed massive amounts of new money but the economy is still deflating because the velocity of money is crashing even faster.
The best way to understand the effect of the velocity of money is to look at the other definition: the number of transactions an individual dollar goes through per unit time i.e. bob pays bill for something who then pays sue for something who then pays john for something in a period of time of say a month. The velocity of money acts as a multiplier of the nominal money supply and the higher it is the healthier the economy is.
So what does it mean?
It means the oligarchs of the banking mafia in their uncontrollable greed have destroyed the economy - again - because if no one has any money they can't spend it.
debt-pushing leads to people not having any money
off-shoring leads to people not having any money
mass immigration leads to people not having any money
so all the things the banking mafia have done over the last 30 years that have impoverished the middle class and enriched themselves has destroyed the economy the same way the banking mafia has destroyed one nation / civilization after another for centuries.
maximum prosperity = maximum middle class
minimum prosperity = minimum middle class (i.e 90% poor, 10% rich and no middle)
welcome to 0bamas marxist wet dream.
There's not much velocity because folks aren't spending much money...
...a great many don't have it to spend on goods and services;they are also finding they need less and less of the stuff they used to buy.
M
but taxes paid in to fed gov continue at record high rates.
Sorry, G.W. - gotta call you out on this one. My previous post was a response to someone juxtaposing money supply, and money velocity.
Anyhoo - back from dinner and an evening out, checked back in to see the dialog, and in dismay, realized your charts were NOT showing money velocity, but Adjusted Monetary BASE (AMB) which is different than velocity.
Velocity charts are only available from 1959 - present, and indeed, look alarming:
http://research.stlouisfed.org/fred2/series/MZMV
Velocity of money is a good metric of economic activity - if people are feeling secure, when they get money, they spend it, and the people who receive that money, in turn, buy something from somebody else, etc., etc.
Bottom line is that both AMB, AND money velocity are at levels never before seen, meaning a moribund and slowing economy (see "Downward Revisions", and "Hilsenrath" in recent ZH articles).
I'm sure Yellen is having a very hard time deciding whether to raise interest rates in July, or September...........
Bilbert, while M1, M2 etc have only been measured since 1959, the St. Louis Fed itself explains:
The issue has to do with the velocity of money, which has never been constant, as can be seen in the figure below.
The chart shows Gross Domestic Product/St. Louis Adjusted Monetary Base.
Where is the infernal helicopter already?
The difference can be of taxation/regulation and inflation.
Whearas inflation is already the measure of the aggregate loss, waste and fraud, of taxation is all the same thing.
Say $1000 passes and taxed as income at 38% state local federal not counting if a sales tax was involved.
If passed throgh wages, more payroll taxes involved. for simplicity lets just say 38% total taxation
But we didnt consider firstly, just to get the $1000 in the first place cost $1380 labor taxed
$1380 Labor
$1000 Taxed $380
$620 pass 1, 1000 -380
$385 pass 2, 620 - 235
$239 pass 3, 385 -146
$1380 is virtually gone after 2nd pass. The labor and life force that created it can never be recovered, satanism.
At pass 2, 385/1385 is 72% self cannibalized socialist pigs before they even left the porch
This is how luciferians spend $8 debt to buy $1 gdp. What I call, pigs to the slaughter.
You aint seen nothing yet with their min wage eliminating work, numbers employed, the original $1380 isnt
even created in the first place.
Anticultist, your math is basically correct. However you started out with an assumption that one needed to earn $1380 in order to net $1000 after a 38% tax. Actually, one needs to earn $1613 to net $1000 after a 38% tax. The balance of your figures after that are correct.
oops big mistake and much worse, then 62% is gone in the first transaction.
There has to be an angle such as get on full welfare, footstamps the whole ponzie
unless one is into 6 figures which really isnt much money anymore either. Im not sure
where the cutoff is but it is probably not worth working at less than 75-80k.
Or for example just work long enough to get permanence of paid necessities like a car and then go on welfare.
I wouldnt have any useful disposable income for sustainance of freedom at much less than what I make
and I am well into 6 figures. 6 figure vs welfare would only be the difference of picking where you rent,
not much reward for a human life in high value productive capacity teetering right around 100k break even income point.
Pure evil. As long as the liberals have one high paid ceo to point to, they have their confimation
bias scapegoat and I dont how you get a consciousness shift to the reality of counting. I think there is going to be a mass
die off. They would rather tax the median class into the fema camps than give up their chant about one high paid
ceo, they dont seem to mind their $1M dollar liberal tv leg inequality blackmail salaries.
I'm not sure about using this as a comparative indicator.
Assuming a stagnant or even slightly growing GDP figure divided by a massively inflated money supply figure would be certain to show a severe drop in velocity even if everything were going on exactly as before.
Not that I follow such things closely. It's going to crash and my only real concern is to not be in town when it happens.
I thot helicopter drops significantly increased the velocity due to the rotor down draft.
...Bullish in America
Fuk - just when I thought I understood the graphs for the second time this month - you brains add all of this shite in posts. Anyway, got it, stock more supplies
actually the best answer .. right there
I wonder how comparable they are ---- this day and age, we don't use much cash, or check. I mostly use pill-pay and credit card.
Still it's way lower than 1990 (at 20).
There is some poor thought here today. The veloclitly of money is how many times a single dollar is spent per month. It high then many people are spending the same amount of dollars on good and services. It low, no one is spending money, and the Fed howls in pain as they are doomed.
They have been increasing the money supply very steeply as well to add liquidity to the Economy as more and more Securitization has taken place and reducing liquidity/increased sensitivity to shocks to liquidity.
So long as Bracko, Manschelle, Bill & Hill & all the rest of the Muckty-Mucks are in 'control', everything is going to be just 'Peachy'. https://www.youtube.com/watch?v=rsL6mKxtOlQ Doesn't really matter who'se at the helm, the ship of state will roll along just fine (just axe 'em).
Don't worry, everything is fine. Pay no attention to facts.
STEP AWAY FROM THE FACTS, everyone move behind the hope and change line. we need all civilians to move a safe distance back away from the zero interest bomb. Stay calm, keep your place in line. you will be called one at a time. We will process you through the extended unemployement process and release you on the other end into the the "no longer exists" category.
everything will return to normal (full employement) as soon as we have processed the next 200 million citizens into the grey circle of exile from employement. Your job will be safely transfered overseas. There will be hope. There will be change.
you will share medical benefits with 11 million new immigrants who will be forced to fill your recently vacated work week. We will prosecute all doctors who attempt to leave the country or refuse to perform any service like the newly approved $50.00 triple bypass. 9 out of 10 government economists agree our new medical pricing structures are adequate. Until then wait for your EBT transfer to arrive.
Those of us fortunate, (or poor) enough to not have to worry about this shit are all thinking, "Who the fuck CARES?"
Money velocity indeed...Must be nice to have to worry about it. It's like the stock market...yay! wow, it's so HIGH! Too bad I don't own any!
When people begin losing confidence in fiat currencies and start trying to dump fiat for something tangible, monetary velocity will shoot the moon and take consumer prices along with it. That's why you should care about money velocity.
3 downvotes? Wtf?
Oh, I forgot, it's the weekend crowd...
I know its bad My life truly sucks.
Banks lending money create velocity.
With negative interest rates, banks make money by borrowing money, which takes the velocity of "money" [IOUs] below levels ever thought possible.
Of course when things turn around, then everything hyperinflates due to global QE.
"when things turn around" Bwahahaha!!!!
Look around, man! It doesn’t get any better than this.
The only hope for humanity is mass-scale, interplanetary travel within the next decade.
Yes, I think this is the good times now in a way.
People have adjusted to lower pay, fewer jobs, more temporary & part time jobs... they still live at home or move back home.
But I'm guessing with Automation & Robots taking more jobs, and more job cuts...
I picture the Era of New York City with Wealthy wearing Top Hats, fancy clothes, and walking canes. And the poor turn into street theives & prostitutes in dirty clothes like Jolly old London 200 years ago.
There is no need for Wealthy to spend their money. In fact they can move offshore with their trust accounts to live on an Island.
There are capital controls on you and me. But Banks & Wealthy can live in an Ivory Tower if they want.
Yes, capital controls are in place for a variety of reasons. Big hint: CONTROL...
Let's start with cash. Current poster boy is Hastert. That unfortunate slime bucket got hit for "structured" cash withdrawals.
Other than that did he do anything illegal? Not in regards to the cash withdrawals. But the bank was legally required to report his transactions to the IRS.
Let's say that instead of stupidly "structuring" his cash withdrawals, he simply wrote a check or wired the money to his fav PM dealer and took possession of $3.5M oz US gold bullion delivered by Brinks and then passed it on to his blackmailer.
Would that have triggered his bank to report the transaction? No. In country transfers are currently not reportable. Billions are transferred by check or wire every day without a peep.
Well, of course they are recorded, but being the wheels of commerce, they are well greased, so to speak...
That is because the "money" is still within the system and traceable.
But converting it to US gold bullion is also exempt from any reporting requirements at the receiving end.
So both transmitting and receiving ends of this transaction are exempt from reporting.
It is a legal way to convert any amount of your digital $ based cash accounts to US bullion Au/Ag without being subject to IRS reporting requirements.
For selling it is also a legal way of converting any amount of certain types of Au/Ag back into digital $ cash without triggering IRS reporting.
This is how you can legally move wealth into and out of the system with no reporting requirements.
If it wasn't for food, fuel, taxes / fees, insurance of various flavors (health, auto, etc), maintenance of property and vehicles, rent, mortgages, college tuition, upgrades of systems, what else would we possibly need or want to spend our money on?
So yes, there are already capital controls in place for a great many of us.
The sheeeple are ignorant. Graphs, mathematical formulas, words, like velocity of money, are fabrications creating sound and fury signifying nothing.
Our economic uebermenschen are frauds, promising increased productivity from their neo-alchemy science. The fault lies in our trust of them. There is no good central banker.
since economists are fond of the liquidity analogy, what happens to pipes when there is plenty of water but it is not moving? (hint same thing as when there is no water)
Notice the trillions in bankster bailouts doesn’t reflect in money flow in the economy? The banksters didn’t invest in the USA economy to create money flow in the economy; they invested in foreign emerging markets.
The induced “cash crash” is the set up for a totalitarian, fascist (merger of corporate monopoly with government) criminal bankster cashless society: cash will be eliminated from society.
Every American individual will be bar coded and scanned for credit points with the banksters and government that will have total control of your life. The terrorist attacks by the Washington Empire of Debt, Fraud and Chaos on the American People will continue.
"Notice the trillions in bankster bailouts doesn’t reflect in money flow in the economy? The banksters didn’t invest in the USA economy to create money flow in the economy; they invested in foreign emerging markets."
You're forgetting the big lie from the bank crash.
When the banks crashed they went massively bankrupt to the tune of trillions *if* their toxic assets had been priced at mark to market.
The banks' true state was negative trillions but the banking mafia and their pet politicians colluded in lying about it so the trillions poured into the banks since then via QE etc hasn't been extra money it's been filling a massive hole that they lied about having.
It's like you have bills of a $1000 but you lie about it and tell people you have savings of $1000.
If someone then gives you $1000 you don't have $2000 you have $0.
And that's what been happening with the banks.
In reply to tumblemore: Everything you mentioned is true, good job.
Also remember that the banksters are hardened criminals that created the multi-trillion dollar toxic waste Ponzi scheme and when you give a criminal bankster $1,000, he doesn’t pay off his debt, he will leverage it to at least $10,000. The criminal derivatives market during the same period grew to a godzillion dollars and the top 1 percent made billions in profit during that period while the debt was transferred to the American people. Who do the American people owe the money to? -- The banksters, of course.
cashless society will never work because it would be too expensive to implement - it would implode before full implementation was reached
In reply to Semperfi: It seems the banksters disagree with you as the cashless society is moving ahead in Europe and the US as their latest wet dream of control and dominance.
So, it is actually worse than it appears because:
A. GDP is a lie and overstated (especially when compared to the 1930s measurement)
B. The money supply is understated
I think are several issues here:
1. There is global USD hording.
2. Velocity can really only increase with a rising interest rate trajectory.
3. Stagnant growth doesn't foster much velocity.
People, banks and companies move money when they need to move money to transact ... if they have it. This is apparently not the case since new money keeps flooding in from the Fed and the old money can stay put.
Money is getting trapped in dark corners, such as the stock market, foreign reserve's, CIA dark accounts and Ben Shalom's undershorts.
True, hoarding & malinvestment, when power shift occurred in the 1990s the power shifted to TBTF Banks & Wealthy.
Normally City, Road, Highway, Bridges, Damns, Sewers, water systems, Utility, and infrastructure projects would stimulate in a similar way to Manufacturing Growth (Multiplier Effect). I'm not an Economist.
Velocity is lower even with higher money supply and higher securitization and higher Credit Levels since the money does not add Value to the Economy. It seems to go to Rentier Activity.
That is why they probably can't stop Fiscal Stimulus or Balance the Federal Budget. And of course Junk rated Credit doesn't help QE, TARP, LIRP/ZIRP.
No different from the PIIGS & Japan.
- Wealth Leakage from households doesn't help
- Higher Costs in Education & Health Care don't help
- Higher Bank Fees, Insurance Rates, Property taxes & Housing Costs don't help
- Economic Leakage, money going off shore doesn't help, whether Trust Accounts, Profits, or Trade Imbalance
Federal Debt Held by Foreign & International Investors as Percent of Gross Domestic Product, 2014:Q4: 34.75940 Percent of GDP,
http://research.stlouisfed.org/fred2/series/HBFIGDQ188S
Current Account Balance: Total Trade of Goods for the United States©, 2013: -703,911,000,000 US Dollars,
Sum Over Component Sub-periods (2013 was last data),
http://research.stlouisfed.org/fred2/series/BPBLTD01USA637S
http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm (wow huge trend, $31 Trillion in Foreign Property in USA vs $24 Trillion)
- How big is the Malinvestment?
- How big is the Economic/Monetary Leakage
- How much money is Hoarded or Stagnant in the Economy
Lawless sharia gov is the hoarding.
Libya, Egypt, Syria, Ukraine, Peace Prize, MF Global, Detroit, nafta, glass-steagle,
cloward-pivon, qe, birth-death model, fraud employment and gdp counting,
2014 middle class tax "relief" act, obamacare - gruber - irs - nsa, ndaa, Benghazi,
sandy hook, isis, just off the top.
I checked the federal reserve online inflation calculator, the $200k targeted 1%er capitalist pigs,
who might be the tiny elite employed class that has something left to hoard or spend, or may employ someone else,
is not enough of them.
This $200k was about 45k of 1975, those are the targeted capitalist pig class.
Likewise the despised 400k employer class was worth 90k of 1975
This is why I always say, pigs to the slaughter and besides that, sin, coveting thy neighbor's.
Now you know why the federalis wont teach the little piggies how to count.
GW, I usually really like your articles, but you have to reconsider in this case. Money velocity is simply a garbage indicator. It is a fudge factor invented by Irving Fisher to make his "Quantity Equation of Money" work, which is really just a meaningless tautology. Money velociy isn't "crashing". That is a statistical artifact resulting from its calculation. All that the decline in money velocity is telling us is that money printing by the Fed has been huge (duh!) and has vastly exceeded GDP growth. No wonder, if GDP were to "catch up" with the growth in money supply since 2008, it would have to more than double. Which is not going to happen, obviously, since the economy has been terminally undermined by said money printing.
In short, this indicator is really not telling us anything worthwhile, and it never has. It does not "mean" anything, it is not foretelling anything, it is just mathematical wankery.
"In short, this indicator is really not telling us anything worthwhile, and it never has. It does not "mean" anything, it is not foretelling anything, it is just mathematical wankery."
For a given nominal money supply x the velocity of money (measured as number of transactions per unit time) is effectively multiplying the nominal money supply.
nominal money supply x with a veleocity of money say 2
nominal money supply x with a veleocity of money say 4
the same?
I disagree that it was a garbage factor to make an equation work.
Fisher's equation does actually reflect reality....one of the few equations that do.
In fact if you look at the Federal Reserve Monetary Velocity Charts that are published in this article and actually LIVED during the Inflationary 1970's and understand that the Monetary Volume was nowhere near where it was today then what caused the Price inflation?
What mirrors the Price Inflation during that era but the Monetary Velocity factor?
Perhaps I read you above as illiterate but now I know better.
Just because the bulk of Keynesian Economics is garbage does not mean that ALL of Keynesian Economics is garbage. Don't throw out the baby with the bathwater.
Stop thinking black and white, especially in this psuedoscientific field. Some of the Hocus Pocus are actually descriptive of Realityand, in some cases,...SOME... they are not attempting to have Reality conform to the equations.
Oh yeah,
We (the wife and I) lived through the Infaltionary 1970's armed with a TI calculator.
That helped us decided how much to put on a credit card and build up a balance to be paid off with much, much cheaper dollars.
Actually made money doing it that way.
Nowadays, it is the exact opposite.
Maybe that will change, but oh the pain...
You must be better read than me.
So how come we don't have more data to discuss this topic. I mean if would take the FED to provide the data and it would be politically charged for the public to know.
- How much money is created by TBTF Banks each year, so that we understand where money is being created, we also need to look at Shadow Banking to see what they are doing
- How much money is stagnant in Bank Accounts or whatever, instead of being invested in the US Economy
- How much money is Leaking offshore for a variety of reasons and what are the categories
- How can we visually understand the change in the Economy from a an Industrial Manufacturing powerhouse to the Economy based on Financial Activity/Engineering/Rentier Rent Seeking
- What is the effect of Infrastructure projects on Velocity
- What is the Effect of Commercial Bank Decrease to 5,500 total, and the Finances being controlled by fewer powerful Banks like in VICHY Wall Street or VICHY DC, What is the Effect of the Federal Government Picking Winners for It Large Investments and Subsidies (malinvestments perhaps?)
Rex:
You might be right. On the other hand: 81.5% of Money Created through Quantitative Easing Is Sitting There Gathering Dust … Instead of Helping the Economy
Ah yes, there are deep, deep mysteries to be found here... profound questions! All that money (81.5%) sits at the Fed in the form of excess bank reserves.
1) your local Fed Member Bank is just letting it sit at the Fed,
2) they're not letting it get loose in the economy where it could create new jobs and eventually get spent...possibly causing inflation!
3) and the Fed Member Banks (part of the Fed "family") are not bothering to go to the trouble of judging risk and making loans because the Fed very cleverly PAYS THEM MORE THAN THEY COULD MAKE BY LENDING IT!
YES! THAT'S THE SOLUTION: PAY THE BANKS FOR DOING NO WORK AT ALL! BRILLIANT!! BRILLIANT!!!! And thusly, inflation is kept under control!!! (more or less).
So, if the Fed doesn't want the money to be lent..., then why let it loose in the first place? Hmmm....