Debt Rattle July 2 2021
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More random thoughts on slowing money velocity:
Some background. Recent Basil 3 changes shows that the large commercial banks have been steadily shifting their lending away from non-financial lending (real economy like manufacturing, etc) and toward lending to governments and other financial institutions. Currently the lending ratio favors governments/financial about 5 to 1. In the future this ratio will go much higher. It will go higher because governments are changing the rules to favor bank lennding to themselves over everybody else!
An example of this is that corporate deposits to commercial banks now only gets a 50% safety rating, meaning the banks must set aside more capital when corporate deposits increase. Naturally the banks, going forward, will now resist new corporate deposits (a new future problem). Individual deposits get a 95% safety rating in comparation. Allocated gold (actual gold on hand) gets a 100% rating while unallocated (paper) gold gets a much lower safety rating, requiring banks to set aside more capital to offset the higher risks of derivatives.
I am wondering if the great increase in lending to governments isn’t the main cause for the slowing down of money velocity?
I personally pay no attention to money velocity since I feel it is an old measurement measuring a relic of the past that no longer has it’s old meaning, as taught in Econ 101.
All I have to do is look around me at the crazy house bidding wars and skyrocketing used vehicle markets to tell me that there is increasing inflation driven money velocity going on! The reality of rising inflation is that people start spending their fiat money quicker and quicker, to extract maximum value before prices increase more. Hyperinflation has arrived when you spend money the same day you get it!
Vincent van Gogh The good Samaritan (after Delacroix) 1890
Definitely a van Gogh; and then there is a version by Rembrandt van Rijin and another by
…where he (van Gogh) copied and modified Delacroix’s painting of The Good Samaritan.Appropriate art today given the U.S. (among others) is experiencing a mental health crisis…
The U.S. I grew up in, people, were, after a certain age told to suck it up…
I guess that U.S. is long gone, smothered by wokeness and a perverse form of political correctness…
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