Apr

23

Over the weekend I did a bit of research into that perennial question: inflation or deflation? That let me to look more closely at velocity of money. Depending on how you measure it (M1, M2, MZM), it seems that velocity of money has been declining pretty steadily since ~2008 (M1), ~1996 (M2), or ~1981 (MZM):

Velocity of M1 Money Stock (M1V)

Velocity of M2 Money Stock (M2V)

Velocity of MZM Money Stock (MZMV)

If (and I do say if) those trends continue, one could argue that deflation is in our future. (The third graph there looks an awful lot like the Japanese experience since ~1991…)

Has anyone here done more detailed research on velocity of money?


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