What the Number Crunchers Get Wrong about the “Velocity of Money”
The "Velocity of Money" Is a product of human choices and human values. It's not something we can just plug into an equation.
The "Velocity of Money" Is a product of human choices and human values. It's not something we can just plug into an equation.
While many attempt to look to "de-regulation" or tax cuts to explain economic cycles, it makes more sense to zero-in on the role of central banks.
What matters is not price rises as such, but the increase in the money supply that sets in motion the exchange of nothing for something or "the counterfeit effect." Business cycles and recessions follow.
The Bolsheviks were shocked to discover the destruction of money failed to bring about the rational economic order that the Communists believed to be inevitable.
Mises declared in 1951: “No boom is possible without credit expansion... the boom which causes the following depression could not occur if the banks did not expand credit."
Ignoring time preference is the fundamental error behind monetary planning. It is why in a successful economy, monetary intervention by the state is kept to a bare minimum, or preferably banished altogether.
Contrary to popular thinking, the velocity of money does not have a life of its own.
Monetary policy has gone from being a tool to support fiscal reforms to an excuse for not implementing them.
By slapping new regulations on high-interest credit cards, Bernie and Ocasio-Cortez will just prevent high-risk borrowers from getting loans.
"Digital cash" is the latest terrible idea from those who want to give central banks more power to meddle in the economy.