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The Velocity Of Money In The U.S. Falls To An All-Time Record Low

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posted on Jun, 3 2014 @ 07:43 PM
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a reply to: crankyoldman

BTW... I have not played the debtors game since the end of the last century. I subscribe to Dave Ramsey's ideas regarding debt. I have been debt free since 2002. Which means that I have not paid a red nickel to the banks to use their money for anything.

If you want something, save up for it and then pay cash. No portion of your income will then be taxed by the banks. You will be able to spend all of it, save those taxes we pay to a wasteful, corrupt, bloated bureaucratic govt.

I just wish I had realized all that decades ago. When I check my credit now, I get zilch...a message that says insufficient activity to generate a score and I am plenty happy with that.




posted on Jun, 3 2014 @ 10:17 PM
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a reply to: 727Sky

I'm not a financial expert but the best thing you can do is to diversify. Spread your money out as much as you can, put some in textiles, some in tech, some in automotive, and so on. Then in each sector divide it into different countries. In addition to that put some in currencies and divide that up among many nations. The idea is that you want to set it up so that if one area takes a beating you only lose a little bit. This protects you from significant loss unless the entire world goes to hell, but if everything takes a loss, everything remains in balance and you're not really any worse off.

Your other option, and I am 100% serious here is to start a savings and investment bank. It takes about 4 million dollars on hand (3.4 to invest, .6 in operating capital) at a 30:1 leverage rate (super bad, but less than our current banks) to create a 1 billion dollar hedge fund. At a billion dollars your fund is large enough that simply moving it into a sector is enough to inflate it and guarantee you make profits. Your fund will collapse when everything collapses, but you'll make enough of it to personally be in a good position.

To address the main point about the velocity of money, it's because our economy is busted. We have a real unemployment rate of 33%, we're essentially in a worse economy than the great depression. It's kept hidden however because the homeless are imprisoned or run out of town, and the soup lines were replaced with EBT cards.
edit on 3-6-2014 by Aazadan because: (no reason given)



posted on Jun, 3 2014 @ 10:25 PM
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a reply to: bbracken677

When it comes to individual finance Dave Ramsey is 100% correct. National level economics follow a different set of rules however and the principals don't simply scale up.



posted on Jun, 4 2014 @ 06:17 AM
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Corporations were very tightly controlled and many of the shenanigans they pull now were illegal in the past.

I guess illegal wasn't quite the correct term but before the changes in law toward corporations in the 1800's and early 1900's they would have not been allowed to exist in the state they currently do.

reclaimdemocracy.org... ations-us/

There are gobs of case law and precedent which allowed corporations to become the "thing" they have become today, dry reading but interesting, especially when it's tied into other aspects of government and life and the changes that were influenced by the freeing of corporations to run roughshod over everything.

a reply to: bbracken677


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posted on Jun, 4 2014 @ 07:57 AM
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a reply to: Aazadan

I never suggested that it did. I was using my own personal situation as the example and the discussion was related to personal debt or in the case of the macro sense in our country overall personal debt numbers which had reached an unsustainable level.

As far as public debt...I fail to see how it would be a bad thing for our country to be run on a cash and carry basis. No debt. The principal of cost of debt still apply and that cost is an albatross around our govt's neck at the moment. Personally I would prefer for our country to eliminate it's debt and simply work off of the principal of either there is money to be spent, or there isn't.

What is wrong with fiscal responsibility?



posted on Jun, 4 2014 @ 06:09 PM
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a reply to: bbracken677

Because money has to be backed by something. We're no longer on a gold standard and the petrodollar is tenuous at best. What backs our currency is the same thing that backs every other national currency in the world and that's debt. The buying of debt means someone has faith in that currency. More debt=more faith. Each currency is backed by the debt of everyone else. This is actually a good system because it prevents total financial collapse and it also reduces the frequency and magnitude of wars. In the case of the US being one of the largest creditors and one of the largest debtors we are in the position where everyone else has staked their currency on ours, giving them an incentive to keep the dollar functional. Simultaneously because we're such a large creditor we are able to inflate the value of the currencies that are invested in the dollar making our own currency worth more.

Politicians who say pay down the debt are either ignorant (this shouldn't be surprising... most of them don't know how finance works at that level, proof is 2008) or do know and are simply aiming for some political talking points. The reality is that shrinking our debt is the worst possible thing we could do. The best possible thing is to continue to grow the debt at a slow-moderate pace, and not have fights over a debt ceiling (another concept that makes no sense) or making payments on the debt. The two worst things to do are rapidly grow the debt (what we're doing now) and to shrink the debt.



posted on Jun, 4 2014 @ 06:20 PM
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originally posted by: Aazadan
a reply to: bbracken677

When it comes to individual finance Dave Ramsey is 100% correct. National level economics follow a different set of rules however and the principals don't simply scale up.


Dave Ramsey was a pied piper back in 2006-2010. He was advising people to take large amounts of cash and use it to pay off debt. all those that did this were FOOLS.

say you had roughly 25k in unsecured debt, 150k mortgage, and say 70k in cash.

Gold and silver at the time had a spot price very appealing. If the people would have instead invested in gold and silver with their cash, they would have DOUBLED or TRIPLED their money in roughly 18 months.!
so, using the example, that 70k would have turned into approx 180k conservatively. now they would have WAAAY more money.
Had they used that 70k and bought on a meager 2-1 margin (only needed 50k and good credit for this) they could have ended up with 300k EASILY!

now become "debt free". I recall his radio show back in 2007-2009. I kept think WHAT FOOLS those callers were for taking large sums of cash and paying off debt instead of buying gold and silver with it. from Jan-09 to Jan-11 silver QUADRUPLED in value. QUADRUPLED.

i GUARANTEE that every single person that used large sums of money to pay of debt back then would have rather made the minimum payments for 2 more years and taken their nest egg and QUADRUPLED it.
edit on 4-6-2014 by HanzHenry because: (no reason given)



posted on Jun, 4 2014 @ 06:36 PM
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It's easy to say that with foreknowledge of the market but commodity trading is very unstable. There's also a difference between the buy and sell prices. It's better personal financial policy to be debt free and then look to invest. No investment is guaranteed and if the bottom drops out you'll be out your money and still in debt... a bad spot to be in. On the other hand if you clear out your personal debt first, anything left over can be freely invested if you're willing to risk the money.

Investing in gold and silver isn't some magical always make money scheme. Many people have lost a lot of money buying into them.



posted on Jun, 5 2014 @ 08:42 AM
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a reply to: HanzHenry

Hindsight is 20/20, no?

In the meantime, I am debt free and have more money to invest with. Not so foolish, IMO. I am semi-retired without a care in the world except for my wife's asthma.

Your history regarding Dave Ramsey is a bit incorrect...I first heard of him much earlier than 2006. He was on the radio during the 90s. I believe his first book was published in the late 1990s. I was debt free by 2002 or there about.



posted on Jun, 5 2014 @ 04:00 PM
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a reply to: Aazadan
I disagree wholeheartedly.

There are many instances where a corporation will buy back stock to increase the value of it's future offerings and current holdings.

The govt, by the vast printing of huge sums has diluted the value of the dollar and increasing the debt to the unsustainable levels it is currently at is insane.

Reducing debt is one of the 2 worst things we could do? Seriously? So you are all for paying interest on the huge debt our govt has? Talk about wasted money ....



posted on Jun, 5 2014 @ 04:51 PM
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a reply to: bbracken677

Reducing the debt reduces the volume of money in circulation by a 2:1 ratio. You lose the dollar in circulation and you lose the dollar of debt that's in circulation. In addition to this, all money is created at interest meaning the debt is impossible to repay (this is done so the value of the debt can support the currency). If we were to pay off just 1 trillion in debt it would take 2 trillion out of the M2 supply which is about 11 trillion dollars. This is a 22% decrease in the money supply, such a thing would have very severe consequences. It wouldn't trigger inflation or deflation... instead it would simply put a total stop to having any liquidity in markets, and no one would have any money to spend throughout the economy. It would create millions of homeless and lines for soup kitchens. If we reduced the debt by an even greater amount it would be worse.

The panic of 1893 for example was brought about by shrinking the money supply after having a period of large money creation which fueled growth and over extension. You can draw a parallel pretty easy between that and the current QE situation. Except they had a better economy initially.



posted on Jun, 5 2014 @ 07:16 PM
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a reply to: Aazadan

First off...that is an oversimplification of the panic of 1893. Vastly oversimplified. The result of the panic was a reduced money supply after a run on the banks. The run on the banks after other events... horse/cart.

2nd, Umm...No.

3rd, again: No.

Seriously?



posted on Jun, 5 2014 @ 08:27 PM
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a reply to: bbracken677

Yes it's a simplicifcation however the root cause was a contraction of the money supply. This is something the banks can do at will, and something the government can do by paying down the debt.

Since you're not able to give a counter argument other than "umm... no" I guess I'll explain this to you.

We have four people.
Andy
Barney
Claire
Danny

All four of them have no money. Andy hires Barney to do some work for him and pays Barney with a $5 IOU. Barney exchanges this note with Claire plus an additional $5 IOU in for some work. At this point $10 of debt has been created. Now Danny comes along, does some work and gets $15 in IOU's.

These $15 in IOU's are taken to a bank and deposited. The bank considers these a liability and loans them out.

Now lets say the decision is made to pay down the debt. Andy spends $1 to pay off $1 of the debt. That $1 liability which is being used as funds in a persons account is removed from circulation. At the same time the $1 asset that was used is also canceled out as the bank reduces $1 in assets in order to remove $1 in liability. That is $2 sucked out of the economy and lost.

When money gets sucked out of the economy the money supply contracts. However when this happens deflation doesn't occur. Currency doesn't suddenly become more valuable because there's less of it or less valuable because there's more of it. Since QE started we've gone from an M2 of 7 trillion to 11 trillion, however the price of goods hasn't gone up by 57% because there's 57% more currency. The price of goods has gone up some, but we don't all have 57% more money... most of us actually have less because the money supply for those of us at the bottom has actually contracted. When this contraction happened the price of goods didn't go down because we have less money. It went up. Something similar has happened in the markets, which this thread has pointed out... the velocity of money has gone way down. Spending has plummeted because no one has money to spend. When people don't have money to spend, they also don't have money to invest. When investments decrease so does liquidity.

So back to the main point. Paying down the debt is stupid. Mindlessly growing the debt is equally stupid.



posted on Jun, 5 2014 @ 09:46 PM
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a reply to: Aazadan

Except that isn't how it works at all. ( insurance commercial flashback)

A dollar bil is not a debt unit. A dollar represents (since not backed by commodity) whatever we, the world, the economy, agrees to. It is like a gold backed dollar except the value of gold fluctuates constantly and we can print as many of them as we like. When we increase the monetary supply, inflation inevitably appears.

In every case, in the past, when a country increased it's debt to unsustainable levels and attempted to print their way out of it, the result has been hyper inflation and economic disaster.

If you borrow a dollar from the bank, you posses a positive unit of a specific value, and at the same time you have incurred the same value plus a percentage of negative debt. In other words, by borrowing, you have become poorer.

It makes sense, economically, to borrow if you can use the money to make more money than you owe the bank.

Our govt is not a for profit entity, hence it makes zero sense to borrow. Specially with an income of over a trillion dollars a year. That is the definition of insanity.

Did I oversimplify? Yep, but no more than the negative balance economy you illustrated.


edit on 5-6-2014 by bbracken677 because: (no reason given)



posted on Jun, 5 2014 @ 09:52 PM
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a reply to: Aazadan

Oh, and when we actually ran a balanced budget in the 90s the economy was not horrible....in the 21st century we chose to increase debt dramatically with .... What results? Wow... Seems that according to your model we should be living la vida loca by now.

No.



posted on Jun, 5 2014 @ 09:53 PM
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originally posted by: bbracken677
a reply to: Aazadan

A dollar bil is not a debt unit. A dollar represents (since not backed by commodity) whatever we, the world, the economy, agrees to. It is like a gold backed dollar except the value of gold fluctuates constantly and we can print as many of them as we like.

Our govt is not a for profit entity, hence it makes zero sense to borrow. Specially with an income of over a trillion dollars a year. That is the definition of insanity.



dollars are DEBT. fractional reserve system. ill find a link.
"like a gold backed dollar" couldn't be further from reality, I cant believe you actually believe this.
our govt IS a CORPORATION. it IS for profit, just not the profit of the people.



posted on Jun, 5 2014 @ 10:02 PM
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a reply to: HanzHenry

You didn't get it. Read the part directly after "like a gold backed dollar". Nothing there is like a gold backed dollar. When our dollar was backed by gold the value of gold in the market did not fluctuate wildly, nor did it just shoot up in value. Oh, and you could not just print dollars willy nilly.

Yes, I get where a dollar can represent a dollar of debt. Key word "represent".

If you or anyone possesses a dollar, you possess a positive unit. If you possess a dollar of debt, that is, in effect, a negative unit. Then it is a liability.

Otherwise it is an asset.

Our govt is NOT a corporation, is nothing like a corporation and if it operates for profit then it fails miserably lol. Seriously?

You seemed to have focused solely on one aspect of my last post.




edit on 5-6-2014 by bbracken677 because: (no reason given)

edit on 5-6-2014 by bbracken677 because: (no reason given)



posted on Jun, 5 2014 @ 10:28 PM
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originally posted by: bbracken677
A dollar bil is not a debt unit. A dollar represents (since not backed by commodity) whatever we, the world, the economy, agrees to. It is like a gold backed dollar except the value of gold fluctuates constantly and we can print as many of them as we like. When we increase the monetary supply, inflation inevitably appears.


Incorrect. A dollar bill is a debt unit. It represents $1 worth of national debt. When the dollar was backed by gold it still represented debt because all dollars are created at interest by the federal reserve. The last time the nation had debt free money was during the Civil War when Lincoln convinced Congress to create Greenbacks. Eventually the bankers forced the government to eliminate them in the mid-late 1800's, otherwise they would still be legal tender today. Also, inflation is supposed to happen, it's what prevents the economy from being a 0 sum game. With inflation it is possible for both sides to profit, inflation also counteracts population growth. When the supply of money remains the same but the population grows, each person ends up with less which results in the money supply per capita shrinking. Inflation prevents that.


In every case, in the past, when a country increased it's debt to unsustainable levels and attempted to print their way out of it, the result has been hyper inflation and economic disaster.


Correct, and do you know why? It's because they use said printing to pay down the debt. Do you know why we haven't collapsed yet despite increasing the M2 by 57% over 6 years? It's because we aren't using that money to pay down the debt. The money has actually been kept out of circulation for the most part, instead it's being used as an asset to back debt. Not to eliminate it.


Our govt is not a for profit entity, hence it makes zero sense to borrow. Specially with an income of over a trillion dollars a year. That is the definition of insanity.

Did I oversimplify? Yep, but no more than the negative balance economy you illustrated.


You're right, it doesn't make sense to borrow, but we do. That's because we have a federal reserve that manages our monetary policy. Rather than have a private board that issues recommendations to Congress as to how much money they should create (as they're supposed to do by law) they've contracted out the duties. The silver lining to this is that the fed wants to stay in business so they have an incentive to not hyper inflate the currency and destroy the value of their assets. Congress when creating it's own money has had a mixed record. We had Continental Script which became entirely worthless in just 4 years, and we had Greenbacks which had a specific amount printed and no more.


originally posted by: bbracken677
a reply to: Aazadan

Oh, and when we actually ran a balanced budget in the 90s the economy was not horrible....in the 21st century we chose to increase debt dramatically with .... What results? Wow... Seems that according to your model we should be living la vida loca by now.

No.



In the 90s we also didn't pay down the debt. Do you know part of the reason why the economy wasn't horrible? It's because we did a slow and controlled increase of the debt (the budget was only balanced for one year, and one year we had a surplus, and if you remember there was considerable debate as to what to do with the surplus). The best thing to do as a nation is to generate a slow and controlled increase of the debt, it should reflect the growth in the economy. That debt should also be paid for, a stunt like what Ted Cruz pulled a few months back would have been disastrous... even the conversation he was putting up did a lot of damage to the economy because it made investors nervous. You grow the debt at a slow rate, and you finance it like a responsible organization.



posted on Jun, 5 2014 @ 10:38 PM
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a reply to: Aazadan

In other words you are saying that debt should constantly increase ad infinitum. And this is ok and in fact, good.

Our country and economy were fine with the exceptions of cyclic downturns due to zero controls on any aspect of the economy, until the 20th century when this self-serving and deluded view of debt started. You cannot seriously suggest that our current level of debt is fine and that we should be growing it. That this level of debt and growing will not yield extremely negative results. That eventually our constantly expanding debt will not, at some point in the fairly near future, result in a lack of confidence in the dollar resulting in collapse and disaster?

Really?



posted on Jun, 5 2014 @ 11:53 PM
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a reply to: bbracken677

the dollar is a "NOTE" a federal reserve NOTE>

that is an instrument of debt. as in a promissory note. a promise to pay money.



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