The Collapse Of Velocity And Its Impact On Rate Policy
Bob Hoye | Jun 07, 2015 01:44AM ET
Snippet from Pivotal Events, June 4, 2015/h3 h3
- The collapse of velocity in 1930 was the public’s choice to hoard cash. It was very distressful to policymakers.
- It prompted Keynes to invent a “new” theory of forced inflation.
- Forced inflation has been “on” ever since.
- This one is GDP/Monetary Base, with data back to 1929.
- The big change was made in 1980, close to the all-time high in commodities.
- For those who still think that Volker personally ended CPI inflation, he is to blame for collapsing velocity.
- For those interested in real financial history, this measure of velocity is plunging at the greatest rate since 1930.
- Velocity increased with the 1932 to 1937 bull market.
- This has not been the case with the bull market that began in 2009.
- Will the recent collapse prompt a new policy making theory?
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