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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Feb 01 2012

Stagnant Money

For many years now we have seen stimulatory monetary policy implemented by central banks around the world. Taking a step back from the modest economic recoveries and upswing in the markets, it is also important to assess what has happened to the velocity of money – which refers to the speed with which money changes hand in a given economy.  If velocity is high, monetary stimulus can be much more potent than if it is low.

This is in part predictable, at least in relation to ECRI’s Future Inflation Gauges (FIGs), which lead turning points in velocity. In our latest study, we show that for a number of key economies money velocity is at or near record low levels, and the FIGs outline the clear trajectory going forward. This view has implications for the efficacy of monetary policy in the months ahead.

Related News & Events

Forecasting Fog

New York Times December 18, 2011

The American economy certainly isn’t at peak strength. With unemployment at a painfully high 8.6 percent, it can’t be. More

 

U.S. FIG Rises

Bond Buyer January 6, 2012

U.S. inflationary pressures were slightly higher in December. More