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Re-examining the Money Velocity Myth and What it May Be Telling Us

Money Velocity Myth

Many economists denigrate the Money Velocity index as yet another useless index that many analysts try to draw correlations without causations concerning the economy - dubbing it the Money Velocity Myth. Is this true? Perhaps not. Let's re-examine this index from a different perspective and then speculate what it may portray for the future. For those that may not be familiar with this index, here is a simple definition. The velocity of money (or the velocity of circulation of money) is a measure of the number of times that the average unit of currency is used to purchase goods and services within a given time period. One can define the Money Velocity formula as follows: Money Velocity = (Prices * Transactions) /

Inflation is Far Worse Than You Think, Especially If You are Poor – A Look at the Big Mac Indicator

Big Mac

Have you ever wondered why the official inflation numbers never seem to jive with your own personal experience in the US? For the most part, the media has dutifully reported the sometimes nonsensical Consumer Price Index (CPI) data as if it were scripture from the Bureau of Labor Statistics (BLS). The CPI is determined by comparing the price differences of a fixed "basket of goods and services" spanning two different periods. Many are scratching their heads to understand why the government and the Federal Reserve (Fed) keep saying there is no inflation, and yet we see prices going up all the time.  So is the BLS lying? No, the BLS is not necessarily lying. They merely are reporting inflation statistics as

Will Taxing the Rich Bring Us Prosperity?

Tax the Rich

Us News and World Report - the United States is often presented by the Left as a horrible shift away from the high levels of tax progressivity that characterized the tax system in the mid-20th century. This conventional account points to top marginal tax rates that were over 90% for the wealthiest Americans in the 1950s and remained at 70% until the sweeping tax reforms of the Reagan era, and more recently under the Trump Administration. Many on the left say we should get back to these 90% rates as before. Let's take a deep dive into this question and find the reality of the taw situation in the US. Statutory tax rates can be misleading for two reasons. First, they

Fighting Over the Crumbs, the Great Diversion from Class to Race

Fighting Amongst Ourselves

The police killing of George Floyd has prompted a remarkable increase in the public's receptivity to the Black Lives Matter movement. Just as noteworthy, though, is a parallel rise in support for more wide-ranging policy solutions to address the broader problem of racial, ethnic, and gender discrimination - tribalism. However, most of the focus on policy solutions is on the tribal differences and little on class differences - especially when it comes to income wealth inequality. This is a stark difference from prior class protests like Occupy Wall Street. Just how did this narrative change from class to race? First, let's take a look at income wealth inequality between race and class. In terms of race, it is true that there

Can we tax the rich to prosperity?

Tax The Rich

Us News and World Report - the United States is often presented by the left as a horrible shift away from the high levels of tax progressivity that characterized the tax system in the mid-20th century. This conventional account points to top marginal tax rates that were over 90% for the wealthiest Americans in the 1950s and remained at 70% until the sweeping tax reforms of the Reagan era, and more recently under the Trump Administration. Many on the left say we should get back to these 90% rates as before. Let's take a deep dive into this question and find the reality of the taw situation in the US. Statutory tax rates can be misleading for two reasons. First, they do

Fiat currency the fuel of leftists – will the Fed rescue us from wealth inequality?

From Bernie Sanders to Warren Buffett, many say that US wealth inequality is a problem. In 2019, big ideas about how to solve it have been in the air. One of the most unlikely solutions is emerging from the Federal Reserve (Fed) ... Ut oh. Neel Kashkari, the outspoken dove at the Minneapolis Fed, says monetary policy can play the kind of redistributing role once thought to be the preserve of elected officials. While that likely remains a minority view among US central bankers, Mr. Kashkari has helped lay the groundwork for a shift in Fed communication this year. It is true that elected officials have been the biggest abusers of currency debasement via deficit spending. But the Fed has also done