Using an out of fashion metric known as the velocity of money, the Austin, Texas-based economist says he’s convinced the rout since the election of Donald Trump is just a bump in the road for an extended rally.
The velocity is the rate at which money circulates in the economy and is usually measured as a ratio of nominal gross domestic product over the total supply. In other words, it measures how well an economy is able to generate transactions, and in turn growth, with an incremental increase of money in the financial system.
The problem is money velocity in the U.S. (as measured by M2) has fallen to a record-low of 1.44, meaning every dollar spent circulates only 1.44 times in the economy, down from over 2 times at the peak in 1997. To Hunt and other adherents, that shows even after years of unprecedented money printing by the Federal Reserve, inflation will remain subdued and elusive, largely because the private sector has chosen to hoard, and not spend, the money in the years after the financial crisis.
Also did I miss something? Since when is velocity outdated??
Submitted January 20, 2017 at 09:24AM by MasterCookSwag http://ift.tt/2jUzKq8
