Saturday, January 14, 2017

Fewer liquidity event cause money to pile up

The money base has grown, but there is no consumer inflation. However, M2 velocity is collapsed. Where have all the transactions gone? The tax dollar sand box is a much less complex place these days.

So, the piling up of money results when the sandbox is less complex, or the natural rate falls.  We are conditional on infrequent significant events, in the meantime remain unbanked, hold digit. Why is the natural rate fallen? Something is wrong, and the likely culprit is government.

How do we find the true cause of dropping velocity?  Forgettime.  Look at how we are unbanked. Black market, bitcoin, food stamps, insurance stamps, tax evasion, shadow banking.  Tax dollars cannot work when 4% o GDP are fixed sequence interest payments; and consumer prices should actually begin deflating.

Whatever growth is or is not happening, it is not going to show up in liquidity events associated with depository institutions, except infrequently, as we can see with velocity fallen. The tax dollar is increasingly inaccurate, and suffers increasing transaction costs with regulation. Us little browns are getting savvy about finding cheaper, more accurate counters than the tax dollar.


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