Last year, Dietrich Vollrath published “Fully Grown - Why a stagnant economy is a sign of success”. Rather than a sign of economic failure, our current slowdown is a sign of our widespread economic success. Our powerful economy has already supplied so much of the necessary stuff of modern life, brought us so much comfort, security, and luxury, that we have turned to new forms of production and consumption that increase our well-being but do not contribute to growth in GDP per capita.
re: "By stabilizing NGDP on this level trend path, the central bank will strive to offset changes in velocity (money demand)."
Money demand is primarily a function of bank-held savings. Banks don't lend deposits, so savings impounded in the banks destroy savings' velocity. This is made quite clear using Dr. Philip George's equation: the ratio of M1 to the sum of 12 months savings.
FDIC insurance is at $250,000. The FED remunerates IBDDs providing the banks with a preferential interest rate differential in favor of the banks over the non-banks (the opposite of Reg. Q ceilings which favored the thrifts). This inverts the savings investment process. And all interest rates are deregulated, all of which destroys savings velocity.
All of this was predicted in 1961. See: “Should Commercial Banks Accept Savings Deposits?” Conference on Savings and Residential Financing 1961 Proceedings, United States Savings and loan league, Chicago, 1961, 42, 43
“Profit or Loss from Time Deposit Banking”, Banking and Monetary Studies, Comptroller of the Currency, United States Treasury Department, Irwin, 1963, pp. 369-386
re: "By stabilizing NGDP on this level trend path, the central bank will strive to offset changes in velocity (money demand)."
Money demand is primarily a function of bank-held savings. Banks don't lend deposits, so savings impounded in the banks destroy savings' velocity. This is made quite clear using Dr. Philip George's equation: the ratio of M1 to the sum of 12 months savings.
http://www.philipji.com/
SEE corrected money supply vs. recessions
FDIC insurance is at $250,000. The FED remunerates IBDDs providing the banks with a preferential interest rate differential in favor of the banks over the non-banks (the opposite of Reg. Q ceilings which favored the thrifts). This inverts the savings investment process. And all interest rates are deregulated, all of which destroys savings velocity.
All of this was predicted in 1961. See: “Should Commercial Banks Accept Savings Deposits?” Conference on Savings and Residential Financing 1961 Proceedings, United States Savings and loan league, Chicago, 1961, 42, 43
“Profit or Loss from Time Deposit Banking”, Banking and Monetary Studies, Comptroller of the Currency, United States Treasury Department, Irwin, 1963, pp. 369-386