Monetary velocity and value chains

 Remove time from the equation, ask instead, what is the clearing rank for an inventory chain, the number of goods transfer from root to leaf.  That should be the monetary base into GDP over the cycle. The clearing time for most consumer goods is a year, so that is a good time sync when used carefully. But that is not all goods, only about 70% of them.

Velocity is very important.  But velocity tells ma that when value chain rank drops, then banks have a harder time collecting fed taxes.  By definition, when velocity drops to one, the game is over; and the game usually over at rank two. The regulated banks have to shut down, shorten the tax collecting value chain, excess deposits back up again.

Transaction rates are central to humans, it is the definition of human. That means, demand follows a corridor, neither too much or too little. In the end, it is all consumer goods folks and comfort is defined at human interaction rates.

The Fed does not go belly up, it can print its own salaries easily. But Congress is faced with a sudden, horrid choice. They have massive tax short falls in a deflationary environment. Then comes the blunder, the large spike in default inflation. Not as bad this time, we have more clues. Here is the chart:

On general ground, this is a constant divisor,  and assumes years are the complete story of the economy. It has information, more information than distortion.  It at least is a good proxy for the complexity of consumer goods on a yearly budget. It is not invented, just imperfectly timed and under sampled.  It looks like something went haywire in 1990. That means the Fed has very few places to stuff the tax collection, banking is about to shut down, a depression.