Holding less cash and relying on more transfer payments

The puzzle, why do folks hold less cash (the inverse of velocity). We are increasingly using the federal government as a personal banker.

This is hiding volatility from the labor, and that is a bad thing. Volatility is a useful signal, and DC is an erratic signal passer.

I puzzled over this until I remembered Kling's post.  Liberals do not get the problem, and they inevitably leave poor people stranded and the wealthy end up with the money.

So, you take this sunbelt state like Florida which lives on government transfers and bubbles. The volatility of federal government comes, on schedule each presidential cycle, and Florida is cut short, no cash reserves. Unemployment shoots up. Same in California.

This is a malformed democracy which cannot transmit signals. On the one hand you have Mankiw completely clueless about masking volatility thru federal support of monopolies, and opposite we have Krugman masking volatility by supporting transfers.  Both of them clueless.

 Notice the rise in state transfers to the states during the stimulus  and the previous leveling off? This is what I mean when I say the stimulus was mainly past due payments fraudulently withheld by the Bush administration. Now they drop again.

But these small states control the Senate, and they are under deflationary pressure. They normally rely on discretionary spending by the Senate and do not have the economies of scale to manage.  Hence the inevitable political restructuring. DC cannot support both without massive fraud, and DC is uncovered, the undemocratic beast that it is.