3 ms·

What specifically does dollar velocity indicate with respect to consumers? Is it more or less a measure of purchasing power?

• drawkbox 7y ago
  Velocity is the exchange of dollars domestically between people and companies. From FRED: > The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy. Less interaction and transactions are happening between individuals because it is mostly debt to large/global corporations or GDP gains and productivity gains going to the top wealth class. Essentially low share of GDP productivity and gains are going to labor, consumers have less money to spend due to wage stagnation due to less share, consumers then exchange less money with one another. By itself it could be explained as many things, but coupled with the debt economy and low wages and low worker share of GDP it impacts it. Real wages and purchasing power have barely budged in 40 years for lower/middle class. [1] [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...