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|User Info||M1 Multiplier goes BELOW 1.0 - WTF??; entered at 2009-02-06 13:15:42|
Money Velocity can only hit zero if either money supply goes to infinity, or if GDP goes to zero. I could possibly see GDP going to zero, but it's pretty extreme. The central bankers get hives if GDP contracts by 10%. GDP going to zero would send them all to an early grave (perhaps not a bad thing then). You can see why they're in such a scramble to get this 'stimulus' money and push it out into the system..
Look at Iceland. In 72 hours they had a MULT and V(x) crash completely. Currency dropped to 30% of prior day's value, Stock Market dropped to 22% of prior days value.
But the ramifications are still working through the Icelandic economy as everything unwinds. Unemployment is still dropping, jobs are still disappearing, protests are still occurring, government is collapsing, and this is months later.
They don't have to go to zero to get the desired effect of a crash/collapse.
Last modified: 2009-02-06 13:16:50 by leraconteur