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US “Insulin Resistant” Economy Sees M2 Money Velocity Falling To A New Historic Low

This is a syndicated repost published with the permission of Confounded Interest. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

Insulin resistance is a terrible thing. Insulin resistance is a pathological condition in which cells fail to respond to the normal actions of the hormone insulin.

Sort of like the UfedS economy. GDP is failing to respond to the enormous insulin in injected into the economic system.  Stated differently, GDP remains sluggish despite the massive waves of M2 money supply being injected into the economy.

M2 Money Velocity is now at an all time low as of Q2 2016.


The problem, of course, is the slow US economic recovery compared to quarters prior to The Fed’s intervention. M2 Money stock  (which includes all elements of M1 as well as “near money.” M1 includes cash and checking deposits, while near money refers to savings deposits, money market securities, mutual funds and other time deposits) has grown at a faster rate than GDP, producing the “insulin resistance.”


It reminds me of the child’s poem Humpty Dumpty.

Humpty Dumpty  The US economy sat on a wall,
Humpty Dumpty  The US economy had a great fall.
Four-score Men Fed employees and Four-score more,
Could not make Humpty Dumpty  the US economy where he was before.

The wall was the US credit and home price bubble, from which we never really recovered.


Poor Humpty Dumpty.


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