06/22/09 Tampa Bay, Florida Minyanville.com had the headline, “Velocity of Money Comes to a Standstill.” The report starts off with the news that “Current consumption, which at $8.2 trillion is around 70% of GDP, has fallen $150 billion from last year,” and that investment, which represents things like building factories, is $1.3 trillion or 11% of GDP, and down 23.3% from last year.”
This is certainly bad news, although I am always leery of the concept of velocity, as it is just the plug number that makes Fisher’s famous equation (MV = PQ) work out, namely that the Money supply times the turnover of the money (Velocity) equals the Quantity of things sold times the Price of those things that were sold. Simple. (more)
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