Looking at this graph, we realize that the velocity of the M2 Money Stock has collapsed since March 2020. This velocity is 1.125 for the first time since at least the 1940s.
For those who don’t know what the M2 Money Stock velocity is, here is the definition that is given by the Fed:
“Velocity is a ratio of nominal GDP to a measure of the money supply (M1 or M2). It can be thought of as the rate of turnover in the money supply — that is, the number of times one dollar is used to purchase final goods and services included in GDP.”
Concretely, the velocity of the M2 Money Stock is the speed at which money passes from hand to hand.
The higher the velocity, the more dynamic the economy. Seeing the velocity of the M2 Money Stock drop to its lowest level in over 70 years is therefore a very bad sign for the United States.
Fed-printed money has remained in the hands of a minority
This means that the trillions of dollars that have just been injected into the American economy by the Fed have remained in the hands of an extreme minority of the population.
This minority, as you know well, made the headlines throughout the summer of 2020. They are the ultra-rich.
You could see Jeff Bezos making the headlines by becoming the first man with a personal fortune of over $200 billion in the heart of August 2020.
You’ve also seen Elon Musk climb all summer long in the ranking of the richest people on the planet to be now close to $100 billion. In front of him is Mark Zuckerberg whose fortune has reached 110 billion dollars.
The money injected by the Fed to support the American economy has resulted in a gigantic Tech bubble in the stock market that benefits all these ultra-rich.
The poorest people who would have needed help the most in the face of the devastating effects of this coronavirus pandemic saw nothing happen except for a $1,200 stimulus check sent by the U.S. government in April 2020.
A meager consolation prize for people living in extreme poverty.
The poorest people are doubly penalized by the actions of the Federal Reserve
The worst of it is that these people will see what they own devalued even more in the coming months. Indeed, their wealth is mostly in cash. The U.S. dollar will be further devalued because of this great monetary inflation.
As a reminder, the U.S. dollar has already lost more than 85% of its value since 1971 and the establishment of the current monetary and financial system.
A double negative effect that will make life even more difficult in the months and years to come.
More and more people are opening their eyes to the unfairness of this system. It is often in moments as difficult as those we are going through in 2020 that the truth jumps out to those who suffer most from the flaws of a system.
https://medium.com/in-bitcoin-we-trust/with-the-feds-actions-causing-the-cantillon-effect-bitcoin-is-your-last-hope-8937c58ef0ec
