Sunday, December 7, 2008
summary
The Velocity of Money and Economic Deflation
Good summary. Explains why the collapse in velocity/transactions/consumer strike is at the heart of the problem. Or why the problem is actually the savers, although you could argue that the debtors created the savings. Anyway, worth a read, quite lengthy.
Posted by stillthinking @ 05:58 PM (937 views)
7 thoughts on “summary”
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Dazednconfused says:
Just about the only half sensible thing I’ve read on marketoracle.
Dbc Reed says:
Look up Aberhart dollars or velocity dollars on Google: an attempt to put Silvio Gesell’s theories into practice.Not the volume of money that matters but how many transactions are achieved in a limited time.The Post-war Radcliffe Commission in the Uk agreed in principle (there were two Radcliffe commissions: the other one was about the disastrous partition of India.)Velocity or stamped money is a way-out idea but things are so bad it might work now.It was certainly suggested for Japan when they could n’t drop interest rates any further..
mountain goat says:
At no point does he say the problem is the savers, this is your addition, and one I have heard you mention before. If you are saving by keeping money in a bank you are not reducing the velocity of money if the banks are functioning normally and lending it out again. You are wrong because the “problem” in the economy is people who take on unsustainable debt, not the savers. People who take on unsustainable debt lead to defaults so that damage to the economy and GDP results.
markj69 str05 says:
Don’t forget, people have been allowed to take on unsustainable debt. Irresponsible lending has a very big part to play.
markj69 str05 says:
It’s been stated on this site many times that banks were lending too freely. One minute they lend to anyone, now they’re making it difficult for all borrowers. Pendulum swing! Very hard to stop the momentum.
mountain goat says:
Saying from thew 1930’s – Why do banks offer you an umbrella when the sun is shining but want it back as soon as it starts raining?
mountain goat says:
Good article though Stillthinking even though I don’t agree with all your conclusions. John Mauldin is one of my favourite writers.