I attended an economic talk last week from a former Fed economist. His name isn’t important, and what he talked about isn’t that great either.
It’s what happened at the very end of the talk.
He accepted questions from the audience, and on a lark I sent in my question. I asked what his thoughts were about the crossing of the M2 and MZM curves I talked about yesterday.
Mine was the very last question! And here’s what he said.
Velocity isn’t important.
I’m not even summarizing what he said. That was how he dismissed my question.
Not important? How long we hold onto money isn’t important? One of the most fundamental forces working against the Fed and inflation isn’t important?
Better yet, one of the best behavioral indicators we have of monetary “stickiness” isn’t important? What’s wrong with this guy?
Here’s what’s wrong. He’s part of the old way of thinking, and can’t see the forest for the trees. The old way of thinking got us into the savings and loan crises of the 1980s, the internet bubble of the 1990, and the Great Recession of 2008.
Fixing our economy, improving our society, and smoothing out our lives so that we can start planning our future more accurately is going to take a new way of thinking. Paying attention to velocity is more important than an arbitrary number like unemployment.
And that’s why I’m all fed up. And that’s why I went out and drank with my friends. And that’s why I hope they don’t invite him back next year.
Now, let’s all get out there and make that money slippery!