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Stagnation: M2 Money Velocity Continues Falling To All-time Lows!

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.

M2 Money Velocity is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. It is measured by looking at the change in nominal GDP compared to the change in M2 money stock.

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M2 velocity keeps falling after peaking in 1997.  What is notable after the 1997 peak is that asset bubbles have replaced solid economic growth. For example, the highest GDP growth during the Clinton years exceeded 5% YoY, while the highest GDP achieved under George W Bush was 4.41% YoY. Real GDP YoY never exceeded 3.5% YoY under Obama.

gdpnubb

In the following chart, you can see the decline in M2 Money Velocity with the infamous Dot.com bubble burst and then the decline in M2 Money Velocity with the dreaded housing bubble burst. Given the tepid GDP growth that followed the housing bubble burst (and the dramatic increased in M2 Money stock), it is not surprising that M2 Money Velocity keeps falling.

bubblesvelo

As you can see, each exploding asset bubble is met with a recession and a massive surge (over 10% YoY) in M2 Money stock. The difference in the Obama years was a non-recessionary surge of 10% YoY in M2 Money stock without a recession.

m2syoy

Measures such a M2 Money Velocity become more and more useless as money printing becomes more prevalent (along with the failure of GDP to grow at previous levels). In fact, since the massive Federal Reserve intervention during The Great Recession,

The good news? The M1 Money Multiplier is almost back to 1.0!

m1mfed

In place of healthy GDP growth, the US has replaced it with asset bubbles that invariably burst creating even more problems.

Here is a GIF of The Federal Reserve trying to stimulate more GDP growth.

failed_flying_machine

Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. I may receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

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