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...I went to the link and that linked to the St Louis Fed Reserve Money Velocity Reports. Looks like money velocity slowly ramped up through 70's , 80's, Peaked in mid 90's through 2005, Then drops to the lows in 2008 to 2019 in a downward trend.
So even if the consumer economy is doing so well in the past few years, Who is holding cash and not moving it, causing a slower velocity? Is it banks or corporations?
Both the M1 and M2 money lines show a somewhat similar story.

The M2 chart shows a deeper drop in 2010 to 2019. Could this be because some people are saving (investing) more , rather than spending ?


Banks and financial services ballooned to be a much bigger percentage of the economy in the last few decades. In the "old days" the financial service industry acted as intermediaries between people who had excess cash and people who needed cash for productive uses.

e.g. I deposited my $1000 in the bank and they paid me 4% interest. The bank took the $1000 and lent it to GE at 6% so they could develop a new jet engine. The bank kept the extra 2% for their service. (In fact it was/is better than that, since under fractional reserve banking, the bank can lend more than the $1000 as they only need to keep a "reserve" of deposits against what they lend out. 20% or something like that, so the $1000 gets lent out 5x with the 2% skim).

But then came credit cards, overdraft fees, etc and other things like consumer vehicle leases (financed), and yes the mortgage debacle, which in aggregate put the US consumer deep into debt and basically locking up all their cashflow into debt servicing.

All the cash piling up with the banks, corporations, and billionaires gets put into assets. Which is why real estate, stocks, bonds, etc are all in bubble territory while the economy sputters at 2% growth. This was exacerbated after the mortgage lending blow-up with quantitative easing and trillions were handed to the banks. There's so much cash out there now that interest rates are going negative! You have to pay someone to hold your cash.

That's why Intercst and myself are talking about when everything comes crashing down again and trillions need to be injected... Put it into the hands of the little people and they will spend it, lifting the economy, not hoard it into asset inflation.

Spiffy
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