Velocity of Money Still Crashing

[mEDITate-OR:
crash and burn and not even know it, yet...

See, here is The PROBLEM = the money supply assumes that money is being circulated. If it is NOT, then the "supply of money" has contracted, even though the number of dollars in circulation has grown.

Rough, to U.S., translation:  the monetary theory for economic expansion is NOT working normally, if at all.

Add to that the FED low interest rate policies did NOT increase lending - at all.

And, what we have is deja vu Japan all over again - NO traditional economic theory is working as it was intended to work.

And, if "nothing" is working properly, you aren't gonna be much longer either.

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Velocity of Money Still Crashing
June 29, 2010


We are speaking of V, as in MV=PQ, of course.

All the latest news of recent days point in the same direction: the continued slowdown in money velocity.

From a quantitative standpoint, check out the graph below of the M1 multiplier, published Sunday by the St Louis Fed, which has contracted sharply in the Great Financial Crisis.

It has plunged an average of 1.60 to 1.80 to less than 1.

All those who have been crying wolf (hyperinflation), due to the expansion of the Fed's balance sheet of money supply, should think about the implications of this graph.

Money multiplier in the United States

Terrifying…

http://seekingalpha.com/article/212291-velocity-of-money-still-crashing?source=email
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And if we take my very personal deflation criterion, which is inflationbelow the ECB's famous annual target range of +1.80% to 2%, Japan has been in deflation since…1992, with the exception of six months in 1997/98 when it "surged" to +2.4%.
With the Tokyo inflation figures as bad as ever, their situation offers little hope in that country.
Core CPI in Japan

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