A decade-plus downtrend in M1 money velocity could be attributable to the dramatic historical deviation of monetary base vs. currency in circulation, began in the Great Financial Crisis (Oct'08) and has accelerated since. In short, depository institutions are holding significant reserve balances. https://lnkd.in/gutxzcxJ On June 30, 2008, 98% of monetary base was represented by currency in circulation (i.e., $824 Billion of U.S. currency in circulation on a $840 Billion monetary base). Money velocity (M1) at that time was 10.64. On October 31, 2022, 43% of money base was seen as currency in circulation ($5.340 Trillion on $2.284 in circulation). Money velocity has plummeted to 1.26 (from 5.27 pre-pandemic).
