Money Velocity
impactnow
5/17/2011 12:16:25 AM
Great article on velocity—what has been done in the past to drive velocity? Why are the powers that be not doing more to increase velocity if they understand its implications?
I couldn't agree more about Groupon. Talk about zero barriers of entry! I do think they hit the tipping point in brand recognition, but becoming the generic name isn't enough. I hear consumers using various competitors and then telling their friends they bought a del with a name they don't even remember, but said it's just like Groupon.
Money Velocity
impactnow
5/11/2011 1:11:54 AM
Groupon is the innovator in the coupon offer concept but it is quickly being barraged with competitor that in some cases are doing it better and with more variety and better offers. For it to succeed long term it will need to evolve to address its target markets more directly with customized offers rather than one size fits all. It’s not a stock I see making a long term growth cycle
Velocity or leveraging?
tokyogai
5/10/2011 12:45:27 PM
I think what you are really talking about is leveraging and the policy is to de-leverage at a time when the giovernment is pumping money into the system. It seems that these forces will work against each other and hence the divergence is feelings that consumers have.
Re: Re : Money Velocity: The Key to the Economy
Tenacious
5/10/2011 8:34:50 AM
Just one question Scott: Are the combined forces of thevelocity of money and the money multiplier stronger than the government’s printing presses?
Re : Money Velocity: The Key to the Economy
yalanand
5/10/2011 2:17:54 AM
Scott,
Great article. When Ben Bernanke knows that there is no use of printing money when there is no multiplier effect and low monetary velocity, why are they still printing money ? Are they taking some action to improve the monetary velocity ?
Money Velocity is like Asset turnover rate
Value Hiker
5/10/2011 2:12:23 AM
For a company to achieve high Return Of Equity, it needs to have a reasonable asset turnover rate, not just a high Net profit Margin. For an economy to expand, it needs a high money velocity, not just a high amount of injected money.
Re: Money Velocity: The Key to the Economy
Broadway
5/9/2011 11:44:56 PM
@Scott, great analysis. My guess for why velocity remains do slow would be simple and qualitative (vs. Your qualitative approach): fear.
Next a question: how fast can those numbers turn around? In other words, bernake is counting on them remaining low to keep inflation risk low. Could velocity zip up fast enough to catch him by surprise?
Re: Money Velocity: The Key to the Economy
Scott McCaig
5/9/2011 5:50:28 PM
Is there a more proper technical term for the following type of velocity?
e.g. I borrow $20k from a bank to buy a car. After they've received three months of payments from me totaling say $1800, I draw $1500 from my line of credit from the same bank to buy a PC. Now I'm paying that bank a little more each month. After a few more months of payments, I draw another $400 for a multi-functinon printer and start adding those payments to my car payment and previous LOC draw. Let's say that these payments now total around $700/month or $8,400/year until I pay off some off the debt. In this example the bank has created a passive income stream of $8,400 based on originally lending $20k. It's not really even correct to try to calculate the return (e.g. 42% annual return). The bank simply kept lending me back my own money (so to speak). That's the most interesting twist on velocity I've run across.
Is there a better technical term for lending the same money over and over and over?
Re: Money Velocity: The Key to the Economy
TelecomFreq
5/9/2011 4:39:47 PM
If the US is not at risk of run away inflation i wish someone would tell the media, they seem to be spinning the current economic situation the other way.
I will be interested to see what you post on this later in the week, Scott
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