How quick is your money cycling through the economy? Bloomberg Business Week wrote a good article months ago about how today’s velocity rate is much slower than it has been over the last few decades. The article is here.
A more pessimistic article about what is happening can be found here. Here it is noted that since the economic recession of 2008, the velocity of money has continued to fall. Synder links the glacial pace of monetary velocity with deflationary pressures.
The fault with these articles is that they treat the economic pie as being fixed in size. The current rate of growth cannot alleviate the levels of debt individuals have. They do not consider the possibility of another economic boom. I will compare and contrast this theory with ideas extracted from three other sources in the next posting:
- Four Forces for Economic Dominance: Unleashing the Second American Century by Joel Kurtzman.
- ¿Por qué el Decrecimiento? Un ensayo sobre la antesala del colapso por Carlos Taibo.
- ¨New Trade Models, New Welfare Implications¨ by Marc J. Melitz and Stephen J. Redding.