From my friends at the WSJ. "In the face of numerous Fed attempts to spur growth, one measure of economic activity, the velocity of money, has kept falling. This gauge, which measures how often a dollar is turned over in the economy, continues to plumb the lowest levels in more than 50 years. Velocity of money fell yet again in the second quarter, based on estimates of gross domestic product. That means even as the Fed has expanded its balance sheet, consumers and businesses have still chosen to hoard not spend cash. Another indication of reticence is the continued growth in bank deposits. Data from the Federal Deposit Insurance Corp's quarterly banking profile this week showed that deposits at insured institutions continue to set records, hitting $10.3 trillion in the second quarter, a 5.7% increase compared with the year-earlier period. That is striking and shows the ongoing uncertainty among households and business executives, given that deposits receive negligible yields. Indeed, a quarter of U.S. domestic deposits are held in noninterest bearing accounts now. Of course, some may see this as evidence that the Fed has actually been too timid in its approach and should be expanding its balance sheet more vigorously. That, though, would increase the risk of inflation, should the velocity of money finally change course." This looks like the economy is coiled tight and ready for a startling break forward as soon as we get new leadership in the White House.
