The Latest Dumb Economic Idea: Velocity Of Money Driven By Securitization
Oh I do love it so when the economists sit all us down, pat us on the head and start talking to us in Baby Language. Once upon a time there was “inflation targeting” and then the Big Bad Wolf came along and ate it for breakfast. So now we are going to bake a magic cake, we will take a little bit of Keynes, a little bit of Friedman, mix in a dash of Austrian Chocolate…and we saved the world…again!!!
The latest idea is that securitization caused the spike in velocity of money (that’s how often it changes hands (V), so if you know how much money there is out there (I’m extremely sceptical about how that’s measured but anyway that’s called “M”) you can calculate nominal GDP:
Here you go…just for anyone with Physics Envy: GDP (nominal) = M*V…QED!!
OK well let’s check that one out, here’s a chart of the velocity of money in USA (green line) with the amount of securitized debt issued in USA (pink columns):
All I can say about that theory is…Err…
“Trained” as an artist (Leeds), then as a scientist (Cambridge); then spent fifteen years working in design/engineering and project management of technology “stuff”. Then got interested in “micro” markets, building supply/demand models to figure-out product sp…
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