During all of the economic turmoil that has occurred since the dotcom bubble bursting in 2000 and the housing bubble bursting in 2008, an obscure measure of economic reality has gone largely unnoticed.
This measure, the velocity of money, while obscure, is one of the most incredibly potent measures of economic health and vitality. It provides extraordinary guidance into an economy’s health and well-being.
The velocity of money is, according to the Federal Reserve, “the ratio of nominal GDP (gross domestic product) to a measure of the money supply (M1 or M2). It can be thought of as the rate of turnover of the money supply -- that is, the number of times one dollar is used to purchase final goods and services in GDP”.
I am an economist and that definition even bored me. Unfortunately, failing to understand the significance of the velocity of money and how to improve it to stimulate economic growth may lead to further economic stagnation and perhaps a depression.
http://www.americanthinker.com/articles/2016/01/the_velocity_of_money.html
This measure, the velocity of money, while obscure, is one of the most incredibly potent measures of economic health and vitality. It provides extraordinary guidance into an economy’s health and well-being.
The velocity of money is, according to the Federal Reserve, “the ratio of nominal GDP (gross domestic product) to a measure of the money supply (M1 or M2). It can be thought of as the rate of turnover of the money supply -- that is, the number of times one dollar is used to purchase final goods and services in GDP”.
I am an economist and that definition even bored me. Unfortunately, failing to understand the significance of the velocity of money and how to improve it to stimulate economic growth may lead to further economic stagnation and perhaps a depression.
http://www.americanthinker.com/articles/2016/01/the_velocity_of_money.html
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