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Who owns all of those zero velocity dollars?

Discussion in 'PM Trading/Stocks/Technical Analysis' started by Ebie, Jul 4, 2017.



  1. Ebie

    Ebie Midas Member Midas Member

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    Velocity is very low.
    That is because big dollar holders are not spending the dollars.
    Who are those?
     
  2. Buck

    Buck Gold Member Gold Chaser

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    I'm to understand it's the "banks"
    Who / What is considered to be a "bank", I can't be exact

    IIRC, the "banks" no longer keep their excess funds on deposit with the Fed and a few years ago, they were prodded to play the markets

    I'm suspecting that's what we're witnessing

    You can probably tell, I'm not really comfortable with my POV on this subject but I think I'm in the ballpark
     
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  3. Ebie

    Ebie Midas Member Midas Member

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    If so, the banks must have great faith in the stability dollar and its future. But, if that is so, why are they not buying T Bonds?
    There may be more to the story...
     
  4. Ebie

    Ebie Midas Member Midas Member

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    "they were prodded to play the markets"
    If they are playing the market, then the dollars would not have zero velocity, correct?
     
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  5. BarnacleBob

    BarnacleBob GIM Founding Member & Mod. Founding Member Site Mgr Site Supporter

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    "The velocity of money is the rate at which money is exchanged from one transaction to another and how much a unit of currency is used in a given period of time.

    Velocity
    of money is usually measured as a ratio of GNP to a country's total supply of money." --Investopedia

    I would argue that in part the velocity has fallen because of the major speculations in stocks, bonds & real estate. All of which play a key fundamental & technical "short" on dollar denominated credit.

    As the credit flotations are directed into the "financial" economy, the "real" economy starves for liquidity. Sectors of the real economy experience dis-inflation and deflation while the financial economy grows by credit inflation. It is the lop-sided imbalances between the two that has collapsed the velocity of circulation.

    Keep in mind the credit flows into stocks & bonds have temporarily tempered the inflationary pressures on the general price index that were created by & thru the Feds various stimulus policies & interest rate pegs.

    Simply stated, the Feds policies have been a deflationary bust to the real economy & a major boom for the financial sectors. Low Velocity informs us that the marginal utility of debt has been debased into oblivion....

    IOW inflating the financial markets @ the cost of the real economy creates a low velocity of circulation as consumption activities are starved of access to capital. If it operated in the reverse, the real economy would explode with price inflation as was experienced in the late sixties & throughout the nineteen seventies, which was only brought down by then Fed head Volker when he artificially raised fed fund rates to 16.5%. Money then flowed out of the real economy & into the financial economy relieving the general price index of inflationary pressures. General commodities along with oil & gold entered a 30+ yr. bear market as the financial sectors sucked up the credit inflation created by .gov debt & credit market activities.

    JMO
     
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  6. BarnacleBob

    BarnacleBob GIM Founding Member & Mod. Founding Member Site Mgr Site Supporter

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  7. Ebie

    Ebie Midas Member Midas Member

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    If someone buys $1B of stock then the money has changed hands and no longer has zero velocity.
    If someone or some organization is sitting on $1B then the money has zero velocity.
    And, that person must have great confidence in the $, not to buy farmland, PMs, orchards, defense factories, etc...
    Interesting.
     
  8. goldfanbrad

    goldfanbrad New Member Seeker

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    Velocity equals GDP divided by money supply. V=GDP/MS

    They keep creating boatloads of new money supply but GDP isn't going up. Therefore velocity keeps going down because of all the excess new money created. Money supply going up faster than GDP means velocity going down.

    So who's getting all the new money first and not doing anything with it?
     
    Last edited: Jul 4, 2017
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  9. Ebie

    Ebie Midas Member Midas Member

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    That is my question.
    And if/when they decide differently...

     
  10. Uglytruth

    Uglytruth Gold Member Gold Chaser

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    Kinda hard for these CEO's that suck up 20-75 mil year after year to spend it all. Most of it sits somewhere.........
     
  11. Pyramid

    Pyramid Gold Member Gold Chaser Site Supporter

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    Butterfly Effect in play also. Millions of Joe and Jane Sixpacks that are paying down debt or are debt-free and investing in themselves rather than buying cheap and unnecessary imported crap from the 3rd world and purchasing cars, houses etc. on credit. People putting fiat into cash, savings, property, PM's and other investments instead of foolishly spending their income away. As career opportunities diminish and wages stagnate thanks to "free trade," intelligent, working-class people realize that they are on their own. JMHO.
     
    Last edited: Jul 4, 2017
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  12. Silver

    Silver Gold Member Gold Chaser

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    The Too Big To Fail Banks - they "borrow" at .25% and the Fed pays them Treasury rates to not lend it.
     
    Last edited: Jul 4, 2017
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