What's also concerning is that the velocity of money is really low while M2 money supply is very high. If the velocity picks up we could be in a world of hurt.
It's various first and second derivatives + the amount of "potential energy" in the system that have (informed) people scared.
You mean... like... a first derivative? What am I mistaken about? I literally said literally exactly this:
>> It's various first and second derivatives + the amount of "potential energy" in the system that have (informed) people scared.
(and, in fact, it's not just the rate of inflation but also several other related rates of change and rates of rates of change and stocks of things that can fuel changes in those rates, but engaging in that nuance seems a bit fruitless given that you seem to be literally repeating my own point back to me while thinking you're disagreeing with me.)
> The rate of inflation growth is horrible right now.
yes thanks for repeating my point for me.
For those curious (like I was) about the exact numbers for that I quickly found this chart [1] from the St Louis Fed that strongly demonstrates OP's point. Only partially related to this, the sustained downward trend starting with about 2006 is really interesting, I'm wondering if there are any (relatively) recent papers written about this phenomenon.
With GDP being mostly the same trend it has been this chart is just tracking the surge in M2.
It seems like having large supply is desirable/correct when velocity is low.
The Fed's next step is to slow down this inflation, and they will do so by raising rates. The Fed's dot plots shows that they will reach the rate of the 30Y Treasury bill sometime around 2024, but with this data they might bring that up to 2023. This will, like every single other time they set the Fed Funds Rate above the 30YT, cause a recession 6 months afterwards, which will bring down the inflation pressures. Problem resolved?
That's totally standard, and not yet the true problem. The problem is after that. Once we reach that recession the Fed quickly drops the interest rate and that brings us out of the recession. But interest rates are already so low, we've already pumped so many dollars into the system, that it might not cut it. We might get cascading failures, we might get stuck in a depression. This might be the end of the long-term debt cycle.
Also in 2008, it looks like money velocity decreased during the recession (as it's been doing almost monotonically since the mid 90s). It looks like after the crash, velocity increased slightly, and indeed the supply contracted just slightly at basically the exact same time.
And doesn't whether that dollar is "destroyed" depend on why the borrower can't pay it? If it's because someone else got ≥ $1 richer off the borrower, then it seems to me like the supply of money in the economy as a whole hasn't actually gone down.