An Important Economic Indicator – Money Velocity – Crashes Far Worse than During the Great Depression

Underneath the Propaganda, the Economy Is In BAD Shape …

We noted 3 years ago that the velocity of money – an important economic indicator – is lower than during the Great Depression.

Things have gotten even worse since since then …

By way of background, the velocity of money is the rate at which people spend money.

In other words, it’s the speed at which a dollar moves from one person to the next through the economy.

The Federal Reserve Bank of St. Louis explains:

The velocity of money can be calculated as the ratio of nominal gross domestic product (GDP) to the money supply … which can be used to gauge the economy’s strength or people’s willingness to spend money. When there are more transactions being made throughout the economy, velocity increases, and the economy is likely to expand. The opposite is also true: Money velocity decreases when fewer transactions are being made; therefore the economy is likely to shrink.

The St. Louis Fed labels the velocity of money as “Gross Domestic Product/St. Louis Adjusted Monetary Base” …  and provides the following data on the velocity of money between the start of the Great Depression and today:


Here’s the money velocity right before the Great Depression hit:

Money 1

Here’s the money velocity from the darkest point during the Great Depression:

Money 2

Here’s the money velocity before the 2007-2008 crash started:

Money 4

And here’s the money velocity from the most recent data from 2014:

Money 3

Bottom line: The velocity of money has fallen much farther – and to much lower ultimate levels – than during the Great Depression.


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  • diogenes

    Note that the historical downturn (1980) coincides with the beginning of 12 years of Reagan-Bush I and continues under Clinton.

  • “Who controls the issuance of money controls the government!” Nathan Meyer Rothschild

  • Here is the 1% criminal list, Which Corporations Control the World?

    A surprisingly small number of corporations control massive global market shares. How many of the brands below do you use? It’s a Small World at the Top.

    Largest banks hold a total of $25.1 trillion

    1.) ICBC, China, $2.95 trillion in assets, over 18,000 outlets, 108 branches globally

    2.) HSBC holdings, UK, $2.68 trillion in assets, 6,600 offices in 80 countries, 55 million customers

    3.) Deutsche Bank, Germany, $2.6 trillion in assets, 2,963 branches, 70 countries, 46 million customers

    4.) Credit Agricole Group, France, $2.58 trillion in assets, 60 countries, over 21 million clients

    5.) BNP Paribas, France, $2.51 trillion in assets

    6.) Mitsubishi UFJ Financial Group, Japan, $2.49 trillion in assets

    7.) Barclays PLC, United Kingdom, $2.41 trillion in assets

    8.) JPMorgan Chase Co., U.S., $2.39 trillion in assets

    9.) China Construction Bank Corp., China, $2.36 trillion in assets

    10.) Japan Post Bank, Japan, $2.12 trillion in assets

    Enough to fund the federal U.S. government for over 7 years. Or roughly $3500 per person on earth.

    • otite

      Decrease in money velocity have a greater downtone on the world at large such dt productivity are often affected via lesser demands for produce, which decrease expected or generatable revenue of investors. This can also lead to retrenchment of staff, there by increasing unemployment to a nation and the world at large.
      Large scale production is often hindered due to poor demands, discouraging investors to compete in the global market, of which would affect the nations National Income and as well hamper the growth and development of the nation at large.
      This increase the absence of revenue to have been generated from tax from the unemployed, of whic wud also slow down development of the nation.
      This is to say decrease in money velocity have ripple effects on a nation and poss hardship to the world at large.

  • Javaid Khwaja

    I think there is a real question as to what velocity is about, and what it is not about? If I am not mistaken Walras’ Law (if three markets are in equilibrium, fourth, will also be in equilibrium!) involved a dichotomy of sorts, where money markets were posited against commodity markets. Thus, whatever velocity of circulation is concerned with, it is most certainly concerned with the process of exchange! Even if velocity is ignored, analytically, the process of exchange will subsume that matter, within itself! Price as an aggregator produces the resultant scenario, that one observes, about the real situation.

  • Michael Aumack

    Velocity of money = the ratio of nominal GDP to the money supply. The QE stimulus just tanked the velocity of money in the marketplace, and sunk the true value of the US $ in historical terms. The illusion of our current ‘recovery’ is due to the dollar’s standing (traded value) as the global reserve currency.. and competing economies are not as large/diversified as ours.

  • Larry Klein

    way too simplistic — the velocity of money falls like this whenever the fed pumps money into the economy, which is exactly what has occurred. IN other words, peoples’s spending patterns are unchanged, but the denominator in the equation, money supply, has increased considerably. By the way–before and during the depression, the government was constraining money supply, unlike what has happened in the last 7 years. So this post jumps to an unwarranted conclusion.

  • Harbinger

    @LarryKlien !unwarranted. Low Velocity is key. When fed lowered to 0 they disincentivize savings. Then add to the problem by squashing all innovation through excessive regulation. .Gov locks up the economy, no capital available from savings, no small companies wanting to borrow, no small homeowners can get loans. It’s called “planned collapse,” a its used to freeze the little guys in place while the elite steal their purchasing power. They print away our purchasing power into QE (diluted) dollars, then put that purchasing power into their own pockets. They HAD to squash the velocity of money so that their crime didn’t show up as hyperinflation.