Author: kwloach

The velocity of money is a term used by economists to describe the number of times one unit of money is used to buy goods and services per one unit of time. Under the broader definition, income velocity refers to transactions involving domestically-produced goods and services, and transaction velocity includes these goods and services plus financial services activity.

The velocity of money is an indicator for the movement of cash in the economy. During recessionary times, the velocity of money is typically low as individuals and corporations tend to save and conserve. When the economy is booming and inflation may be high, money can burn a hole in your pocket, and the tendency is to spend (and receive) more quickly and more often. Either of these conditions could be considered good or bad for a variety of reasons, but it is typically more desirable to have money changing hands more often; it is a sign of an active and stimulated economy.

Trickle-down economics (for example, the 2017 trillion-plus dollar tax benefit given to corporations and the wealthy) might not be the most efficient form of governmental support for the economy. What if the 2017 trillion-plus dollars of trickle-down Trumponomics was instead divided evenly and given to each individual in the United States? This would have put approximately $4,000 into the hands of each man, woman, and child in the country.

It is almost certain that the vast majority of this cash would end up back in circulation stimulating the economy through locally purchased goods and services. Some of these funds would be clawed back to government on a transactional basis through both income taxes (higher earners have higher marginal income tax rates) and sales taxes (the higher velocity of each dollar would reap and return more taxes).

Parking cash in the stock market has no societal benefit in this model. The financial services industry does not create value in the traditional sense as it does not contribute to a goods and services framework except through money management, hence the separate definition for transaction velocity versus income velocity. Likewise, growth in the stock market has little value in the health of the economy as the velocity and potential benefit to operational activity is negligible.

A rising stock market is of value only to the segment of the population that is most invested in it – wealthy individuals and cash-rich corporations. As far as participation goes, the middle class is typically not well-invested in the stock market as many have their assets tied up in home ownership (especially the boomer generation), and the poor typically have no discretionary income available to devote to this type of activity.

Extra funds directed toward the top 1% typically end up in the stock market providing no societal economic benefit (Rx Music 2020).

A brilliant British documentary about capitalism is The Century of the Self by filmmaker Adam Curtis. It is about the twentieth century conflation of three concepts: the positive attributes of democracy; the less positive attributes of capitalism; and the zero positive attributes of consumerism.

Democracy has become synonymous with consumerism, and it has become our constitutional right to get more stuff whenever we want to get more stuff. Throughout the four-part miniseries, which covers 100 years of psychologically deceptive marketing, it is difficult to avoid feeling used, abused and manipulated as the work of Edward Bernays (nephew of Sigmund Freud and self-proclaimed originator of “public relations”) is reviewed and analyzed (Curtis 2002).

Using psychotherapy techniques, Bernays’ marketing campaigns conflated democracy with the desire to acquire. Purposefully stroking egos and playing upon feelings of entitlement, he positioned wanting as more important than needing. Over the past century, democracy has been transformed from a concept promoting freedom of choice and self-determination into a self-centered competition for winning approval through the accumulation of assets.

Neoliberal capitalism is based on financial accountability. Governments and businesses attempt to follow a strict code of austerity, restraint, privatization, cutbacks and balanced budgets. This would be fine except that cuts typically affect lower/middle class jobs and happen on the front line where service provider support is most valued and most needed (i.e. teachers, administrators, laborers, etc.). Restraint is focused on returning shareholder value, and rarely addresses excessive management salaries or bloated bureaucratic infrastructures. The Market (as God) rewards the rich and commodifies everything else.

Democracy was conflated with consumerism through the aggressive promotion of capitalism, specifically neoliberal capitalism, now a well-established principle found at all levels of society and government (Rx Music 2020).