Velocity Of Money Collapses

[Ares]

http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=BN0

http://research.stlouisfed.org/fred2/series/M2V

[EE_]

http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=BN0

http://research.stlouisfed.org/fred2/series/M2V

Does it really matter?

http://si.wsj.net/public/resources/images/ON-BD235_bGTCht_NS_20131230151625.jpg
http://3.bp.blogspot.com/-ig2dd5KGUKQ/UsBCpUZpB5I/AAAAAAAAKRA/Gl0JBbQEZUU/s1600/YMY00-Dec-29-2013.png
http://davidleetrendfollowing.files.wordpress.com/2013/12/year-nasdaq-2014-weekly-chart-outlook1.png

[Ares]

It does if you're wanting to maintain an economy. Wall Street is a different world. Without the velocity of money it just shows the wall street sham for what it is. A Ponzi scheme were the last person holding the bag is expected to turn out the lights.

[EE_]

It does if you're wanting to maintain an economy. Wall Street is a different world. Without the velocity of money it just shows the wall street sham for what it is. A Ponzi scheme were the last person holding the bag is expected to turn out the lights.

Yep, we all know it, but with the printing presses running at full bore, the Ponzi scheme can last a loooong time.

[midnight rambler]

Yep, we all know it, but with the printing presses running at full bore, the Ponzi scheme can last a loooong time.

Only so long as the illusion can be maintained, and I liken that load to being similar to a sled load at a tractor pull - the load increases as the pull continues down the track until the truck or tractor pulling the sled stalls or stops for whatever reason (blown engine, loss of traction, etc.).


https://www.youtube.com/watch?v=r1dDjUxZu64

[EE_]

Only so long as the illusion can be maintained, and I liken that load to being similar to a sled load at a tractor pull - the load increases as the pull continues down the track until the truck or tractor pulling the sled stalls or stops for whatever reason (blown engine, loss of traction, etc.).


https://www.youtube.com/watch?v=r1dDjUxZu64

But when I can print trillions at will, I can pay everyone off at the sled pull and have a rigged sled behind my tractor too.
I'd bet I can rig just about anything with enough money. What I can't rig will just disappear.

[Sparky]

Both sides in this argument are correct. The game is an illusion, but it's a challenge to guess when the jig will be up.

The real height of crisis will occur when the government can no longer fulfill its promises to provide for people. The best measurable projection of this is Social Security obligations. Here is a projection of the annual deficit:

6405

Yes, I understand that these projections are to be taken with a grain of salt. However, they reasonably approximate the tone and timing of the problem. In the current projection, the deficit remains generally constant, and then turns dramatically worse in 2018, and increases steadily unit it reaches a peak in 2032.

The illusion likely cannot be sustained through this period of dramatic expansion of deficit. Something will have to give because there will be real people looking for real food and real shelter, and not fiat paper. The middle of this expansion is 2025. So the financial pressure will likely reach unsustainable levels some time in the 2020s decade. I'd say the government could lose their ability to control this illusion any time within that 10-year window.

Incidentally, this is completely in line with the timing projected in the Fourth Turning, written in 1997.

[Hitch]

Sparky, so we have 6 good years before that 10 year window even starts. I always appreciate your insight, so 6 more years before the whole system goes belly up?

I like that. 6 more years to get even more prepared. Optimism is good. Doom isn't 6 months away, but 6 years!

[midnight rambler]

gov.gov is making all those preparations for the zombie apocalypse/that inevitable day when the illusion craters. <six months or >six years, doesn't really make that much difference the final outcome will still look the same - the mother of all train wrecks.

[Jerrylynnb]

I have had a contrary opinion for several years now, and, I can't seem to shake it.

If I were born into the ruling class (the owners of the central banks - the FED, the Bank of England, France, Germany, etc, the World Bank, etc. etc.), the last thing I would want would be for the dollar to get devalued to zero (like the old mark did in the 1920's). I would be part of a clique that has it made, so to speak, in that I wouldn't have to toil but could live off interest payments on new money loaned out that gets created at the time the loan is granted. What a deal. Never have to worry about toil and hard work, just keep loaning out newly created money and let all the debtors slave away to pay me back with interest, but with money that has to be earned by the sweat of their brow - such a deal!

So, no, I wouldn't let the dollar lose ALL its value - I would let it lose value slowly so that the interest paid on all those loans would still be more valuable than the principle that was lent.

But a trick I WOULD employ ever few generations would be to suddenly constrict the ease at which new loans are granted (after making them easy as pie so as to indebt a large portion of the working class), which would temporarily make dollars very valuable, and, it would also make labor costs go way down so you could get top notch labor at bargain basement prices - isn't that the way the Hoover damn was built - with dirt cheap top quality laborers that were desperate for a measly paycheck and life-threatening work was accepted (how many laborers got lost in the massive concrete pour????).

All these new loans that have been made since the bail-out (in 2008) have been super secret, so we in the public can't really know just how many dollars are truly available to the general public - and all this alleged extra cash could vanish overnight, since it is mostly entries in an accounting system and the details are kept secret (didn't Bernake REFUSE to tell congress where the new money went?????? - and didn't he get away with his defiance?????)

At the very least, none of us know for sure just what the true money supply really is - and it just goes against the grain (of the super rich) to kill their goose that lays golden eggs (dollars, pounds, francs, marks, etc.). Why would they let such a free ride expire when they hold all the cards and can play the game any way that they think gets them the most profit and control.

I expect dollars to be around for a long long time, and, for their value to hang in there, maybe even increase markedly for a time (after the "great constriction"), but never dwindle beyond what interest payments can yield against the principle that gets loaned out.

Ah, but I wasn't born into that privileged clique, so, all I can do is speculate.

[Ares]

I have had a contrary opinion for several years now, and, I can't seem to shake it.

If I were born into the ruling class (the owners of the central banks - the FED, the Bank of England, France, Germany, etc, the World Bank, etc. etc.), the last thing I would want would be for the dollar to get devalued to zero (like the old mark did in the 1920's). I would be part of a clique that has it made, so to speak, in that I wouldn't have to toil but could live off interest payments on new money loaned out that gets created at the time the loan is granted. What a deal. Never have to worry about toil and hard work, just keep loaning out newly created money and let all the debtors slave away to pay me back with interest, but with money that has to be earned by the sweat of their brow - such a deal!

So, no, I wouldn't let the dollar lose ALL its value - I would let it lose value slowly so that the interest paid on all those loans would still be more valuable than the principle that was lent.

But a trick I WOULD employ ever few generations would be to suddenly constrict the ease at which new loans are granted (after making them easy as pie so as to indebt a large portion of the working class), which would temporarily make dollars very valuable, and, it would also make labor costs go way down so you could get top notch labor at bargain basement prices - isn't that the way the Hoover damn was built - with dirt cheap top quality laborers that were desperate for a measly paycheck and life-threatening work was accepted (how many laborers got lost in the massive concrete pour????).

All these new loans that have been made since the bail-out (in 2008) have been super secret, so we in the public can't really know just how many dollars are truly available to the general public - and all this alleged extra cash could vanish overnight, since it is mostly entries in an accounting system and the details are kept secret (didn't Bernake REFUSE to tell congress where the new money went?????? - and didn't he get away with his defiance?????)

At the very least, none of us know for sure just what the true money supply really is - and it just goes against the grain (of the super rich) to kill their goose that lays golden eggs (dollars, pounds, francs, marks, etc.). Why would they let such a free ride expire when they hold all the cards and can play the game any way that they think gets them the most profit and control.

I expect dollars to be around for a long long time, and, for their value to hang in there, maybe even increase markedly for a time (after the "great constriction"), but never dwindle beyond what interest payments can yield against the principle that gets loaned out.

Ah, but I wasn't born into that privileged clique, so, all I can do is speculate.

All very good points of observation. They can only keep this golden goose going and living the life of luxury if the plebs are borrowing their money to pay them interest (hence velocity of money). If that stalls, or collapses as in this case the foundation for which they've built their empire becomes unstable. Interest payments are missed, or don't come in at all. The plebs are filing bankruptcy left and right relieving them of their interest payments. Wary of taking on more debt and with no jobs to repay the debt, they just stop borrowing. Velocity of money collapses, and their golden goose becomes a rancid corpse.

Empires rise and fall, Rome had it's elite banking class as well. Still doesn't change the fact that a foundation of sand is a foundation of sand. The only unknown is when the foundation shifts enough to collapse their empire down on all of us. The more things change, the more they stay the same.

[Horn]

Rome withstanding, in a world full of fiat privateers who at some point only stand a chance to gain off a huge dollar drop when they are fully vested in hard assets and pig bellies (0 velocity).

The larger the market risk to fall is, the harder and steeper will be the dollar crash.

[Libertarian_Guard]

http://gold-silver.us/forum/showthread.php?73492-Unprecedented-downward-trend-in-the-money-multiplier