Maybe — but notice what that claim is doing. Velocity isn't a force; it's a residual, V = PY/M, the name we give to whatever reconciles money with spending. "Velocity has peaked" is a forecast dressed as an observation, and it can't be confirmed until well after the fact.
Meanwhile, the observables point the other way: NGDP growth near 7% and Divisia M4 near 7%. Two series running together means velocity is roughly flat right now, not falling.
And grant the peak anyway. A falling velocity is a reason for the Fed to offset it, not to sit still — which is precisely what a nominal spending target does automatically, and why it beats watching money. If velocity is going to do the tightening for him, Warsh still needs something that tells him when it has done enough. He hasn't got it.
Concerning future movements in policy instruments, saying nothing is appropriate.
Warsh is spot on. Velocity has peaked.
Maybe — but notice what that claim is doing. Velocity isn't a force; it's a residual, V = PY/M, the name we give to whatever reconciles money with spending. "Velocity has peaked" is a forecast dressed as an observation, and it can't be confirmed until well after the fact.
Meanwhile, the observables point the other way: NGDP growth near 7% and Divisia M4 near 7%. Two series running together means velocity is roughly flat right now, not falling.
And grant the peak anyway. A falling velocity is a reason for the Fed to offset it, not to sit still — which is precisely what a nominal spending target does automatically, and why it beats watching money. If velocity is going to do the tightening for him, Warsh still needs something that tells him when it has done enough. He hasn't got it.
The transaction's velocity of funds is not residual. See: “Quantity leads and velocity follows” Cit. Dying of Money -By Jens O. Parson
Or you could study the G.6 release.
And the ratio of DDs to TDs is still increasing.