Monetary Slow Down

While the Fed has increased the money supply by $2 trillion and will increase it by another $1 trillion by 1/1/14, inflation is MIA. This is because the velocity of money, or the number of times a dollar changes hands before it is saved, has collapsed. Before the Great Recession, M1 (cash) velocity was 10.5, now it’s 6.5 and M2 (cash and checking accounts) velocity was 2, it’s now 1.5.

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