Velocity of Re-circulation - Sign of the Times

All you have to do is look at the dominant economic theories perpetrated today. Google “money velocity”. The one that progressively stands out is that money velocity doesn't matter. (1) 'Velocity Of Money' Is Superfluous, And Gresham's Law Is A Myth (Forbes) (2) Velocity Does Not Have an Independent Existence (Mises Institute) (3) The Useless And Dangerous "Money Velocity" Concept (Steven Saville) There is money velocity, defined as *income* velocity, a contrivance (make believe): where N-gDp or R-gDp is divided by some questioned and varying measure of the money stock. Then, alternatively, there is the velocity of re-circulation, which is a transactions concept related to the loanable funds theory. The loanable funds theory is based upon the expansion of credit, both commercial bank credit (new money) and non-bank credit (existing savings), where market clearing interest rates represent the price of credit. Bank debits, or debits to deposit accounts, are the best measure of this activity. Unfortunately, according to the regressive theories perpetrated, the G.6 Debit and Demand Deposit Turnover Release was discontinued in September 1996. Today, neither money nor velocity are of much concern in the FOMC’s deliberations. To say that money velocity doesn’t matter is tantamount to saying savings don’t matter either. To dismiss the velocity of re-circulation is to deny that people may dis-save. To say that money velocity is a spurious concept is to conflate stock with flow. Jeffrey Snider contemplates on why consumers are cutting back on retail spending, or any kind of spending for that matter. It is axiomatic. CAPEX outlays depend upon consumer spending. The demand for capital goods is a derived demand, derived from primary consumer demands. The increase in money velocity up until 1981 was the direct result of financial engineering, of new commercial bank deposit classifications, the relaxation of gate-keeping restrictions within the payment’s system. Financial innovation for bank deposits plateaued in the 1st qtr. of 1981. Since 1981 savings have been increasingly impounded and ensconced within the framework of the payments’ system (predominately due to the DIDMCA of March 31st 1980). This destroys money velocity, simply because all bank-held savings are un-used and un-spent. Why? Because from the standpoint of the entire economy, commercial banks pay for their new earning assets with new money, not existing deposits (a theoretical error). The remuneration of interbank demand deposits exacerbated the deceleration of money velocity. 100 percent reserve banking will do the same. Japan is prima facie evidence.