In my Fiscal Times column today I try to explain why our economic problem results primarily from a decline in velocity (the ratio of GDP to the money supply), which impacts on the economy exactly the same way as a decline in the money supply. The following table illustrates my point.
|Monetary Velocity and GDP|
( billions of dollars )
|*If velocity were 1.93; |
quarterly figures at annual rates
Source: Commerce Department, Federal Reserve and author’s calculations
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