March 19, 2013

Is money velocity the recovery's Achilles heel?

Markets are bumping up against record highs.

GDP - although lacklustre - is expanding.

Employment is rising.

Bullishness is strengthening.

Real estate is recovering.

Question 1: Why is money velocity STILL falling?

Question 2: What happens to inflation if money velocity rises?

Question 3: If central banks withdraw liquidity to combat inflation, how will an overlevered economy respond?