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IPFS News Link • Economy - Economics USA

The Great Dispossession Part 3

• https://www.paulcraigroberts.orgPaul Craig Roberts

In Part 2, I explained the multi-year quiet regulatory changes that dispossessed us of our property.

In Part 3, I explain David Rogers Webb's conclusion that a massive financial crisis is pending in which our financial assets are the collateral underwriting the derivative and financial bubble and will result in the loss of our assets but leave us with our debts as happened to those whose banks failed in the 1930s.

Webb begins with the economic formula that the velocity of circulation of money times the money supply equals nominal Gross Domestic Product. V x MS = GDP.

The velocity of circulation is a measure of how many times a dollar is spent during a given period of time, e.g., quarterly, annually. A high velocity means people quickly spend the money that comes into their hands. A low velocity means people tend to hold on to money.

Velocity impacts the Federal Reserve's ability to manage economic growth with money supply changes. If the velocity of money is falling, an expansionist monetary policy will not result in rising GDP. In such a situation, the Federal Reserve is said to be "pushing on a string." Instead of pushing up GDP, money supply increases push up the values of financial assets and real estate resulting in financial and real estate bubbles.

Webb notes that falls in velocity are precursors of financial crises. A multi-year sharp fall in velocity preceded the stock market crash in 1929 and the Great Depression that gave birth to regulatory agencies. The 21st century is characterized by a long-term fall in velocity that has reached the lowest level on record, while stocks and real estate have been driven to unprecedented levels by years of zero interest rates. When this bubble pops, we will be dispossessed.


www.universityofreason.com/a/29887/KWADzukm