M2 Money Velocity Began Dying in 1997 And What That Means For Us

from Jesse’s Café Américain

It is correct to say that money velocity does not do anything. It does not do anything in the way that the speedometer on your car does not do anything. But it is an important measurement, a ratio of the amount of money being created and it relationship to productive, organic growth in the economy.

And it is well known that money velocity peaked in 1997, and has been in a steady decline since then. It is now at lows never seen before in the US economy. It, like the implications of the long term stagnation of median household income, remains largely unremarked, and if noticed, excused away as unimportant.

Why is this?

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