Velocity of M1 money soared to unprecedented heights during the housing bubble, dating from the housing provisions in the Taxpayer Relief Act of 1997. Money changed hands at a rate over 35% faster at the peak reached in October 2007 at 10.367 than at the previous high levels around 7.4.
The burst bubble has seen velocity of M1 plunge to 6.5 today after all those years of new highs from 7.5. Velocity in the 6s was common for twenty years between the 1970s and 1990s, and looks to be again.
This is what happens when you convince Americans to unleash all the stored up capital in their homes, and squander it. Thanks Bill Clinton. Thanks Newt Gingrich.
