What's your take on the low velocity of money right now?
jmski52
Posts: 22,854 ✭✭✭✭✭
Apparently, about 29% of people are starting to hoard cash, which is a deflationary factor because it defeats the Feds intent of QE by keeping money from being spent into the economy.
If that is indeed what is taking place, what will change the equation in favor of spending the money instead of saving it? Is it good to be ahead of the curve in spending saved-up cash?
If that is indeed what is taking place, what will change the equation in favor of spending the money instead of saving it? Is it good to be ahead of the curve in spending saved-up cash?
Q: Are You Printing Money? Bernanke: Not Literally
I knew it would happen.
I knew it would happen.
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Once deflation takes hold it historically is very hard to reverse.
Many have long claimed inflation was coming and we are now entering a deflationary cycle.
Many have long claimed the equities markets were going to crash and yet they continue to climb higher.
Whatever most think....will probably not occur.
Most buy what during inflationary time? Staples... So one must get into the distribution chain, the closer to the root the better...
Or what assets can produce food, drink, gas, water, electric.. Etc, there is really not much one actually needs, most all stuff bought is waste and non necessary or what some may deem luxurious...
Cash cows?, convenient stores, gas stations, auto parts, booze, tobaccky, I'm sure one can think of a bunch of others...
<< <i>Once deflation takes hold it historically is very hard to reverse. >>
I would like to see it first. One sector, energy has declined. Not true though of groceries, housing, medical, education etc. and that is with a strong (relatively) US currency.
Not buying that the Europeans or Japanese are seeing deflation with their over produced Euro's and yen in the toilet. China? I will leave that open for debate.
There is a lot of nervousness in this economy right now.
There is weak leadership in this country and that influences people to pull in the reigns.
Can't say I blame the savers.
Or hell just spend like here,
http://www.wsj.com/articles/gauguin-painting-sells-for-almost-300-million-1423182712?ref=/home-page
Oh yeah, many have long predicted a crash of the FRN/dollar also.....yet it continues to get stronger.
Holding paper money
Or
Saving in accounts?
<< <i>Define hoarding cash
Holding paper money
Or
Saving in accounts? >>
Not spending it...
<< <i>"and that is with a strong (relatively) US currency. "
Oh yeah, many have long predicted a crash of the FRN/dollar also.....yet it continues to get stronger.
Stronger against a gallon of gas and a basket of fiat currencies. I guess Gilead's $80,000 hepatitis drug dropped a bit as well.
See how many greenbacks you need now when Fido gets sick or the kid gets into a good school. Tell me how strong it is in the auto showroom where an average car costs $30,000?
Do you really believe that a currency gets stronger when the inventory is multiplied by a factor of five.
Good grief.
QE4 will arrive later this year to put even more money into the hands of the wealthiest with little effect on velocity.
<< <i>My take: "Too few people with too much money". There are tens of trillions of USD out there to be spent. 10% of our population holds 80% of it. Get outside of the top quartile of wealth and there's peanuts remaining. The bottom 75% hold about 5% of the total and that keeps the velocity low.
QE4 will arrive later this year to put even more money into the hands of the wealthiest with little effect on velocity. >>
So I just need to make it into that top 1% and im good right? I wish...
BST Transactions (as the seller): Collectall, GRANDAM, epcjimi1, wondercoin, jmski52, wheathoarder, jay1187, jdsueu, grote15, airplanenut, bigole
<< <i>My take: "Too few people with too much money". There are tens of trillions of USD out there to be spent. 10% of our population holds 80% of it. Get outside of the top quartile of wealth and there's peanuts remaining. The bottom 75% hold about 5% of the total and that keeps the velocity low.
QE4 will arrive later this year to put even more money into the hands of the wealthiest with little effect on velocity. >>
Accurate summation. The college football coach earning $8,000,000 a year (Harbaugh at Michigan) is only going to spend what, 10% of that for living expenses? Pay his top 30 players $25K each and you will see some velocity.
<< <i>Depends what one is goin to spend it on... Buying Gold/silver pm's is also deflationary as the majority of the purchase is stored...
Most buy what during inflationary time? Staples... So one must get into the distribution chain, the closer to the root the better...
Or what assets can produce food, drink, gas, water, electric.. Etc, there is really not much one actually needs, most all stuff bought is waste and non necessary or what some may deem luxurious...
Cash cows?, convenient stores, gas stations, auto parts, booze, tobaccky, I'm sure one can think of a bunch of others... >>
Spending the money is key. I don't think they care what you'd do with the stuff you bought. Buying a new sofa to sit in your living room for 20 years is hardly that much different than buying a bar of silver to add to your stack. Neither one is going anywhere anytime soon. Caint spend it all on consumables.
<< <i>
<< <i>"and that is with a strong (relatively) US currency. "
Oh yeah, many have long predicted a crash of the FRN/dollar also.....yet it continues to get stronger.
Tell me how strong it is in the auto showroom where an average car costs $30,000?
>>
Should I answer with facts or just something that feeds into your hyperbole?
Sales per dealership up for the third year in a row.
I know it doesn't fit your story but what the heck
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>
<< <i>Define hoarding cash
Holding paper money
Or
Saving in accounts? >>
Not spending it... >>
Probably lots of reasons
Loss of economic security is one and that will be through continued growth.
1. Dodger tickets
2. Lakers tickets
3. Bullion silver
<< <i>(Con't) useless things to spend money on the last three years,
1. Dodger tickets
2. Lakers tickets
3. Bullion silver >>
But at least you're spending it.
QE was never meant to increase consumer spending, it was intended to provide continuing liquidity to the banks for the next time they blow something up. QE continues to do just that parked with the FED as excess reserves.
When the FED is ready to increase consumer spending it will put free money directly into the hands of the spenders.
Auto purchases are being primarily funded with sub prime credit. It will blow up.
MV is important to Washington. Every time a dollar changes hands new income taxes are created. Eventually, the FED will rightly make increasing MV a top priority, the tax base depends on it.
QE in some form will become as permanent as zero percent interest.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
Should I answer with facts or just something that feeds into your hyperbole?
>>
Ha, if you take away half of the hyperbole on this board the post count drops 90%.
But on the subject of cash hoarding, even hoarded cash can be spent very quickly.
I must admit I have been hoarding it a few months, but it's velocity will speed up dramatically when I blow it on March Madness in Vegas in a month.
Of course, it's not very much, but it will be moving(gone) fast....Northern Iowa baby ;~
<< <i>Low VM indicates consumers have greatly reduced their borrowing. A good thing. Most consumers spend their disposable cash. the difference now is they are borrowing less. I disagree that consumers are hoarding cash.
QE was never meant to increase consumer spending, it was intended to provide continuing liquidity to the banks for the next time they blow something up. QE continues to do just that parked with the FED as excess reserves.
When the FED is ready to increase consumer spending it will put free money directly into the hands of the spenders.
Auto purchases are being primarily funded with sub prime credit. It will blow up.
VM is important to Washington. Every time a dollar changes hands new income taxes are created.
QE in some form will become as permanent as zero percent interest. >>
+ 100
<< <i>If one has a CC balance and an extra $100 does it do more economic good to spend the $100 at WalMart or Best Buy or some such place or pay down your CC debt by $100? >>
Paying down debt does not increase MV. It is money that was spent earlier.
Keeping/increasing personal debt is good for the FED's economy. Reducing debt is good for the individual's economy.
Personal debt is the modern slavery. The big bag of IOU's will burst again.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>If one has a CC balance and an extra $100 does it do more economic good to spend the $100 at WalMart or Best Buy or some such place or pay down your CC debt by $100? >>
Paying down debt does not increase MV. It is money that was spent earlier.
Keeping/increasing personal debt is good for the FED's economy. Reducing debt is good for the individual's economy.
Personal debt is the modern slavery. >>
Yep and I care more about my personal economy. A lot of people are up to their ears in debt and can't afford to take on any more debt so as a result they spend less. Only the Guvmint has a bottomless bank account.
<< <i>A lot of people are up to their ears in debt and can't afford to take on any more debt so as a result they spend less. >>
But they do get to enjoy the latest and greatest in consumer goods that they bought with plastic.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>A lot of people are up to their ears in debt and can't afford to take on any more debt so as a result they spend less. >>
But they do get to enjoy the latest and greatest in consumer goods that they bought with plastic. >>
I do as well, but I just don't pay that silly interest. I use my CC as much as possible.
<< <i>
<< <i>
<< <i>A lot of people are up to their ears in debt and can't afford to take on any more debt so as a result they spend less. >>
But they do get to enjoy the latest and greatest in consumer goods that they bought with plastic. >>
I do as well, but I just don't pay that silly interest. I use my CC as much as possible. >>
CC = credit card or,
CC = cash card
It's a cash card for me as well, I use it for the rebates.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>
<< <i>
<< <i>A lot of people are up to their ears in debt and can't afford to take on any more debt so as a result they spend less. >>
But they do get to enjoy the latest and greatest in consumer goods that they bought with plastic. >>
I do as well, but I just don't pay that silly interest. I use my CC as much as possible. >>
CC = credit card or,
CC = cash card
It's a cash card for me as well, I use it for the rebates. >>
credit card. I don't own or have a debit or cash card. No plans to get one either.
<< <i>Apparently, about 29% of people are starting to hoard cash, which is a deflationary factor because it defeats the Feds intent of QE by keeping money from being spent into the economy.
If that is indeed what is taking place, what will change the equation in favor of spending the money instead of saving it? Is it good to be ahead of the curve in spending saved-up cash? >>
stashin cash
<< <i>My take: "Too few people with too much money". There are tens of trillions of USD out there to be spent. 10% of our population holds 80% of it. Get outside of the top quartile of wealth and there's peanuts remaining. The bottom 75% hold about 5% of the total and that keeps the velocity low.
QE4 will arrive later this year to put even more money into the hands of the wealthiest with little effect on velocity. >>
What we need is strategic redistribution. It's not fair that these 1%-ers took so much of the economic pie. Like the President said, "at some point you've made enough money." The President is running out of time....
Edfsp
<< <i>
<< <i>My take: "Too few people with too much money". There are tens of trillions of USD out there to be spent. 10% of our population holds 80% of it. Get outside of the top quartile of wealth and there's peanuts remaining. The bottom 75% hold about 5% of the total and that keeps the velocity low.
QE4 will arrive later this year to put even more money into the hands of the wealthiest with little effect on velocity. >>
Accurate summation. The college football coach earning $8,000,000 a year (Harbaugh at Michigan) is only going to spend what, 10% of that for living expenses? Pay his top 30 players $25K each and you will see some velocity. >>
Our Warriors (UH) Coach only makes $500k. He doesn't win much but it still doesn't seem fair. Football is about feelings and self-esteem building not wnning(?) Well, that's what I've noticed about Island Football.
<< <i>
<< <i>My take: "Too few people with too much money". There are tens of trillions of USD out there to be spent. 10% of our population holds 80% of it. Get outside of the top quartile of wealth and there's peanuts remaining. The bottom 75% hold about 5% of the total and that keeps the velocity low.
QE4 will arrive later this year to put even more money into the hands of the wealthiest with little effect on velocity. >>
What we need is strategic redistribution. It's not fair that these 1%-ers took so much of the economic pie. Like the President said, "at some point you've made enough money." The President is running out of time.... >>
Where you been? We have had a massive strategic redistribution going on for decades. "All the money to the top" on orders from Wall Street. Everybody in D.C. has been high stepping to this march since at least 1980.
The only way Obamacare passed was with the promise of trillions of USD to health care/insurers over the next decade. It ain't hard to see what's happening. The fastest growing group of Americans is "low income". They are now the majority and will be 3/4 of our nation within most of our lifetimes.
<< <i>Imagine bringing your $50 bill to Walmart. They scan it via the USTreasury website and then tell you it only buys $45 worth of merchandise due to stagnation. >>
The government of Alberta (Canada) tried something kind of like this during the Great Depression in 1936. They issued $1 banknotes that needed to have a 1-cent stamp affixed to the bank of the note one a week in order for it to retain it's full face value of $1.00. This encouraged people to spend the note before that date (kind of a hot potato), and discourage hoarding.
The notes were incredibly unpopular, as people obviously didn't like having to pay 1% interest per week. To make things worse, the stamps sometimes fell off as the bills were handled/became worn.
http://en.wikipedia.org/wiki/Prosperity_certificate
Any chance the 1% earned it rather than "took it"?
What is strategic redistribution? And, is it fair?
You don't know football.
Just sayin'
And, I am on island a lot!
Mahalo
<< <i>"What we need is strategic redistribution. It's not fair that these 1%-ers took so much of the economic pie. "
Any chance the 1% earned it rather than "took it"?
What is strategic redistribution? And, is it fair? >>
It's obvious they 'took it' because that's what the rich do.
Just like 'strategic patience' which the President is deploying against ISIS he will deploy 'strategic redistribution.' We just have to trust him. He knows what he's doing.
<< <i>"Football is about feelings and self-esteem building not wnning(?) Well, that's what I've noticed about Island Football. "
You don't know football.
Just sayin'
And, I am on island a lot!
Mahalo >>
E Komo Mai.
Have you seen the Pro Bowl? It's a 'love in' for the players. They come here to get massages, drink Mai Tais and jog around the field while adoring fans throw leis at their feet. It's WWF at best.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>Its those damn feds causing that. >>
Besides why store fiat currency that will go to zero anyway?
I give away money. I collect money.
I don’t love money . I do love the Lord God.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Falling MV was here before deflation. It has nothing to do with hoarding cash and everything to do with how much disposable income is really in the hands of the spenders. MV is THE indicator that the economy is not mending regardless of what our leaders and their lapdog media tell us. Fix the economy and you fix MV.
It has everything to do with the largest age demographic in their peak earning years already having all the "stuff" they need and saving for retirement. The economy will be "fixed" when this large population group is less influential.
Knowledge is the enemy of fear
<< <i>Falling MV was here before deflation. It has nothing to do with hoarding cash and everything to do with how much disposable income is really in the hands of the spenders. MV is THE indicator that the economy is not mending regardless of what our leaders and their lapdog media tell us. Fix the economy and you fix MV. >>
<< <i>It has everything to do with the largest age demographic in their peak earning years already having all the "stuff" they need and saving for retirement. The economy will be "fixed" when this large population group is less influential. >>
Baby boomers spending habits
I submit that while retirement age individuals are not borrowing into bankruptcy, they are spending on the retirement they looked forward to. Adding in the skyrocketing cost of their healthcare and the support they provide for their less economically fortunate children makes them among the biggest contributors to consumer spending.
The great rise of MV from 1987 to 1999 was the result of spending borrowed money. The decline in MV for the past 15 years is the result of that debt.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>Falling MV was here before deflation. It has nothing to do with hoarding cash and everything to do with how much disposable income is really in the hands of the spenders. MV is THE indicator that the economy is not mending regardless of what our leaders and their lapdog media tell us. Fix the economy and you fix MV.
It has everything to do with the largest age demographic in their peak earning years already having all the "stuff" they need and saving for retirement. The economy will be "fixed" when this large population group is less influential. >>
It's a fascinating graph, thanks for posting it derryb and jmski52 for starting the thread.
My take is similar to cohodk's (again) and I'll ask you all (maybe even in a separate thread): "What are YOU "in the market for"? as in "what will you spend your money on?"
I'll wager that folks who hang around on the precious metals forums already have Maslow's hierarchy of needs pretty much taken care of by now and are shopping for pieces of metal to stick in their lock box. My question really is: when you begin to be a net seller and realize the profit from storing the bits of metal until someone buys them from you for hopefully more than you paid, what will you be buying? Shelter, food, and energy, or something higher up such as love and life experiences? Maybe some of everything?
Looking at the graph, my take is that it looks like the line should, historically speaking, turn up at some point and seek the middle of the range, and that we're getting due for another recession (which would, I guess, push the line back down?)
business as ususal when it comes to the big questions and the large aggregate measures of millions and billions of transactions.. "it depends on the particulars"
Liberty: Parent of Science & Industry
<< <i>(Con't) useless things to spend money on the last three years,
1. Dodger tickets
2. Lakers tickets
3. Bullion silver >>
Good Item:
1. Galaxy tickets
Thanks to the baby boomers who were in the midst of family formation thus requiring things like strollers, baseballs, 2nd cars, new houses, ect, ect, ect. The bulk of the boomers were born from 1952 to 1960. This placed all of them in their 30s during your specified time period, which also happens to be when people make baby and need "stuff'.
The generation behind them is still creating families and spending/borrowing but there are not enough of them to replace the boomers who are cutting back on spending and saving.
Knowledge is the enemy of fear
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i> Its not a lack of potential consumers but is in fact a lack of potential consumers with money (or credit) to spend. >>
Is the referent for your "Its" (sic) the low money velocity? Maybe They are doing what the Experts say they "should" do, which is reduce debt and increase savings. Isn't that good?
<< <i>Entitlement checks cannot support the economy as we once knew it. >>
Are those checks supposed to "support the economy as we once knew it"? I'd say, no, the baby boomer bubble trajectory was unsustainable no matter what. Regression toward the mean.
<< <i>Its [sic] not about the number (demographics) of spenders, it is about the amount of disposable income that they have to spend. >>
Again the aggregate money velocity thing?
I don't know about you guys, but the money velocity in my house has never been higher, we spend what we earn from my job (maybe a little more than that) and make up the difference with passive investment income, the remainder of which income and capital appreciation accumulates (and fluctuates in value, because it's invested) We've been nesting hard core for a decade now and have another decade to go until these little birdies fly the coop.
When I was a single guy, the dynamics were different, and they'll be still different someday when we're empty nesters. For now, busy busy busy and never been happier
Liberty: Parent of Science & Industry