The velocity of money is low and yet the central banks keep printing more and more money. Of course, this new money hasn’t made it past the first tier of the money-lending process, so it hasn’t really ‘hit the streets,’ though it has been bouncing back and forth in the equities markets to prop those up artificially.
This is why I am so confused when Mish (Mike Shedlock) keeps going on and on about deflation and how the possibility of hyperinflation is “laughable.”
IF that new money ever gets pushed out through the second tier of the money-lending process and the velocity of money increases, inflation will fly off the charts. How it does not result in hyperinflation (there is already no confidence in the currencies), is beyond me.
Debt Saturation.
Only by crossing the Rubicon, the ultimate moral hazard, can the central banks push money into the hands of the consumer.
They have to give it away. Literally.
Some of this was attempted a couple of years back when everyone got a "refund" of x dollars on their taxes. However, the government is the only party that can do that (at least in modern history) and they have to BORROW that money. The political feasibility of that diminishes by the day.
Only by completely breaking the faith of debt, destroying all financial assets holders in the process, can the Fed inject this money where it will be SPENT.
Other than that it will languish and shrink as banks, brokerages and markets trade it around.
That's what has driven up stocks and commodities while real estate continued to decline. No the holders of those assets are turning around to find nothing but a cold wind at their back. And they NEED the cash to cover all their other bets at the same time the price of their assets is declining.
The central banks of the world have created about $25trillion in new money over the last 4 years and not a cent has reached the average Joe.
It just goes into banks, brokerages and markets to be, literally and actually, destroyed.