Getting Less Bang for Fed Bucks .

The velocity of money is one of those quirky calculation that attempts to explain money flows and the impact of growth or regression of the money supply.  As the velocity goes down that means money is changing less, usually indicating people are saving more, spending less.  Just the opposite effect if the velocity is going higher which means money is trading hands more often.

This velocity indicator is somethings that the Fed has no control over as it implements it's monetary policies.  Theory has it that as you increase the money supply, the velocity of money is supposed to increase thus representing growth in the economy.  Just the opposite has happened since the Fed began expanding it's balance sheet over the years.


Source WSJ