Who dares to mention the word recession anymore? Now, we have another robust jobs report just when the economy seemed to be cooling. Fortunately, there is a consistent explanation. The velocity of money. The velocity of money fell to almost 1.0 during the pandemic, the absolute floor. Velocity was never going to stay at one in a fractional banking system. This paper shows the strong relationship between velocity and real interest rates and the loan-to-deposit ratio.
I put this analysis together to help me understand the COVID-19 situation while I am confined to shelter in place in California. I am sharing it with other managers to help decision-makers understand this fluid, ever-changing situation. Let's all stay strong. #beatcovid19 #beatthecoronavirus #covid19 #staystrong
Who dares to mention the word recession anymore? Now, we have another robust jobs report just when the economy seemed to be cooling. Fortunately, there is a consistent explanation. The velocity of money. The velocity of money fell to almost 1.0 during the pandemic, the absolute floor. Velocity was never going to stay at one in a fractional banking system. This paper shows the strong relationship between velocity and real interest rates and the loan-to-deposit ratio.
