All monetary savings originate within the payment's system. All bank-held savings are lost to both consumption and investment – i.e., until their owners, e.g., invest them directly or indirectly via non-bank conduits. And activating monetary savings outside of the banks does not reduce the size of the payment's system.
Secular stagnation is the deceleration in the transactions' velocity of funds because of the impoundment of savings in the commercial banking system.
A credit crunch occurs when there is an outflow of funds or negative cash flow.
The last period of disintermediation for the commercial banks, prior to the monetary policy blunders during the Great Recession, occurred during the Great Depression, which had its most force in March 1933.
Ever since 1933, the Federal Reserve has had the capacity to take unified action, through its “open market power”, to prevent any outflow of currency from the payment’s system. That’s what the discount window is for.
BAGEHOT’S DICTUM: the central banks should lend early and ‘without limits’ to solvent firms at a ‘higher interest rate’ with ‘good collateral’. But discounting was made a penalty rate on January 6, 2003
But Volcker did the opposite where discounting was not contractionary.
And: “In 2002, the Federal Reserve began to set the discount rate above the federal funds rate, reversing its previous practice of keeping the discount rate below the funds rate.”
Bank credit contraction is cumulative and reinforcing. Contraction is usually volatile and disorderly.
Nothing was learned in the 1980's. Monetarism has never been tried. Volcker targeted non-borrowed reserves when borrowed reserves vastly exceeded the borrowed ones.
No money stock figure standing alone is adequate as a guide post for monetary policy.
The G.6 was discontinued, according to the Federal Register, because:
“The usefulness of the FR 2573 data in understanding the behavior of the monetary aggregates has diminished in recent years as the distinction between transaction accounts and savings accounts has become increasingly blurred (And that’s also what Chairman Alan Greenspan said about M1). Further, the emphasis on monetary aggregates as policy targets has decreased. In addition, respondent participation has declined over the last several years. For these reasons, the Federal Reserve proposes to discontinue the survey and the related statistical release.”
And funny again, we knew this already. In 1931 a commission was established on Member Bank Reserve Requirements. The commission completed their recommendations after a 7 year inquiry on Feb. 5, 1938. The study was entitled "Member Bank Reserve Requirements -- Analysis of Committee Proposal" Its 2nd proposal: "Requirements against debits to deposits"
After a 45-year hiatus, this research paper was "declassified" on March 23, 1983. By the time this paper was "declassified", Nobel Laureate Dr. Milton Friedman had declared RRs to be a "tax" [sic].
The boom/bust in real estate would have stood out like a sore thumb if the G.6 wasn't discontinued.
Vi is a “residual calculation - not a real physical observable and measurable statistic.” Income velocity may be a "fudge factor," but the transactions velocity of circulation is a tangible figure.
I.e., income velocity, Vi, is endogenously derived and therefore contrived (N-gDp divided by M) whereas Vt, the transactions’ velocity of circulation, is an “independent” exogenous force acting on prices.
Money demand is viewed as a function of its opportunity cost-the foregone interest income of holding lower-yielding money balances (a liquidity preference curve). As this cost of holding money falls, the demand for money rises (and velocity decreases).
As Dr. Philip George says: “The velocity of money is a function of interest rates”
As Dr. Philip George puts it: “Changes in velocity have nothing to do with the speed at which money moves from hand to hand but are entirely the result of movements between demand deposits and other kinds of deposits.”
See: New Measures Used to Gauge Money supply WSJ 6/28/83. Neither Barnett nor Spindt, nor the St. Louis Fed's technical staff: “Although the evidence is mixed, the MSI (monetary services index), overall suggest that monetary policy *WAS ACCOMMODATIVE* before the financial crisis when judged in terms of liquidity. — use accurate money flow metrics reflecting changes to AD.
See: Fed Points
“Following the introduction of NOW accounts nationally in 1981, however, the relationship between M1 growth and measures of economic activity, such as Gross Domestic Product, broke down
See: Solving the 1980s’ Velocity Puzzle: A Progress Report By Daniel Thornton
Solving the 1980s' Velocity Puzzle: A Progress Report (stlouisfed.org)
Dr. Daniel Thornton: "Because the concept of velocity stems directly from the theory of the demand for money, anything that affects velocity can be related to some aspect of the demand for money."
There's no confusion. SuperNow and MMF growth accelerated the transactions' velocity of funds, just like the widespread introduction of Now accounts in the first qtr. of 1981 (which propelled N-gNp to 19.2% until reserve requirements were imposed on those accounts).
The stock market bottoms of 1982 and 1984 coincided with the bottoms in money flows, the volume and velocity of money. I correctly predicted both. 84's rise in R-gDp coincided with short-term flows.
It's a no brainer that Barnett thinks there are different user demands on different aggregates.
All monetary savings originate within the payment's system. All bank-held savings are lost to both consumption and investment – i.e., until their owners, e.g., invest them directly or indirectly via non-bank conduits. And activating monetary savings outside of the banks does not reduce the size of the payment's system.
Secular stagnation is the deceleration in the transactions' velocity of funds because of the impoundment of savings in the commercial banking system.
A credit crunch occurs when there is an outflow of funds or negative cash flow.
The last period of disintermediation for the commercial banks, prior to the monetary policy blunders during the Great Recession, occurred during the Great Depression, which had its most force in March 1933.
Ever since 1933, the Federal Reserve has had the capacity to take unified action, through its “open market power”, to prevent any outflow of currency from the payment’s system. That’s what the discount window is for.
BAGEHOT’S DICTUM: the central banks should lend early and ‘without limits’ to solvent firms at a ‘higher interest rate’ with ‘good collateral’. But discounting was made a penalty rate on January 6, 2003
But Volcker did the opposite where discounting was not contractionary.
And: “In 2002, the Federal Reserve began to set the discount rate above the federal funds rate, reversing its previous practice of keeping the discount rate below the funds rate.”
Bank credit contraction is cumulative and reinforcing. Contraction is usually volatile and disorderly.
Nothing was learned in the 1980's. Monetarism has never been tried. Volcker targeted non-borrowed reserves when borrowed reserves vastly exceeded the borrowed ones.
No money stock figure standing alone is adequate as a guide post for monetary policy.
The G.6 was discontinued, according to the Federal Register, because:
“The usefulness of the FR 2573 data in understanding the behavior of the monetary aggregates has diminished in recent years as the distinction between transaction accounts and savings accounts has become increasingly blurred (And that’s also what Chairman Alan Greenspan said about M1). Further, the emphasis on monetary aggregates as policy targets has decreased. In addition, respondent participation has declined over the last several years. For these reasons, the Federal Reserve proposes to discontinue the survey and the related statistical release.”
And funny again, we knew this already. In 1931 a commission was established on Member Bank Reserve Requirements. The commission completed their recommendations after a 7 year inquiry on Feb. 5, 1938. The study was entitled "Member Bank Reserve Requirements -- Analysis of Committee Proposal" Its 2nd proposal: "Requirements against debits to deposits"
http://bit.ly/1A9bYH1
After a 45-year hiatus, this research paper was "declassified" on March 23, 1983. By the time this paper was "declassified", Nobel Laureate Dr. Milton Friedman had declared RRs to be a "tax" [sic].
The boom/bust in real estate would have stood out like a sore thumb if the G.6 wasn't discontinued.
Vi is a “residual calculation - not a real physical observable and measurable statistic.” Income velocity may be a "fudge factor," but the transactions velocity of circulation is a tangible figure.
I.e., income velocity, Vi, is endogenously derived and therefore contrived (N-gDp divided by M) whereas Vt, the transactions’ velocity of circulation, is an “independent” exogenous force acting on prices.
Money demand is viewed as a function of its opportunity cost-the foregone interest income of holding lower-yielding money balances (a liquidity preference curve). As this cost of holding money falls, the demand for money rises (and velocity decreases).
As Dr. Philip George says: “The velocity of money is a function of interest rates”
As Dr. Philip George puts it: “Changes in velocity have nothing to do with the speed at which money moves from hand to hand but are entirely the result of movements between demand deposits and other kinds of deposits.”
See: New Measures Used to Gauge Money supply WSJ 6/28/83. Neither Barnett nor Spindt, nor the St. Louis Fed's technical staff: “Although the evidence is mixed, the MSI (monetary services index), overall suggest that monetary policy *WAS ACCOMMODATIVE* before the financial crisis when judged in terms of liquidity. — use accurate money flow metrics reflecting changes to AD.
See: Fed Points
“Following the introduction of NOW accounts nationally in 1981, however, the relationship between M1 growth and measures of economic activity, such as Gross Domestic Product, broke down
See: Why Does Velocity Matter? By Daniel Thornton
Why Does Velocity Matter? (stlouisfed.org)
See: Solving the 1980s’ Velocity Puzzle: A Progress Report By Daniel Thornton
Solving the 1980s' Velocity Puzzle: A Progress Report (stlouisfed.org)
Dr. Daniel Thornton: "Because the concept of velocity stems directly from the theory of the demand for money, anything that affects velocity can be related to some aspect of the demand for money."
https://files.stlouisfed.org/files/htdocs/publications/review/87/08/Solving_Aug_Sep1987.pdf
There's no confusion. SuperNow and MMF growth accelerated the transactions' velocity of funds, just like the widespread introduction of Now accounts in the first qtr. of 1981 (which propelled N-gNp to 19.2% until reserve requirements were imposed on those accounts).
The stock market bottoms of 1982 and 1984 coincided with the bottoms in money flows, the volume and velocity of money. I correctly predicted both. 84's rise in R-gDp coincided with short-term flows.
It's a no brainer that Barnett thinks there are different user demands on different aggregates.