Australian credit growth is slowing with Investor housing credit growth slowest ever, Broad Money Supply growth slowest since the last recession 26 years ago

Australian credit growth is slowing but outstanding debt remains at historically high levels. Housing credit growth, personal credit growth, investor housing credit growth and business credit growth are all slowing. But the rather surprising thing is broad money (M3) supply growing at a 12-month rate of just 1.9%, the slowest since 1992 when Australia faced eight consecutive quarters of declining economic growth.

Australia Broad Money M3 12-month growth rate until July 2018
Data Source: Reserve Bank Of Australia

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Euro Area or Eurozone Money Velocity seems to be shockingly low

We couldn’t find any official Money Velocity numbers for the Euro Area (Eurozone) so calculated it using the Equation of Exchange

Equation of Exchange

MV=PQ

Money Supply (M) * Money Velocity (V) = Price level (P) * Real economic output (Q)

Which means Money Supply * Money Velocity = Nominal GDP

Therefore, Money Velocity = Nominal GDP/Money Supply

We have the numbers for both Money Supply (from OECD – Organization for Economic Co-operation and Development) and Nominal GDP (from Eurostat) for the Euro Area.

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Here’s how much money supply has grown for major economies in the past decade (2008 to 2018)

Broad Money M3

Broad money (M3) includes currency, deposits with an agreed maturity of up to two years, deposits redeemable at notice of up to three months and repurchase agreements, money market fund shares/units and debt securities up to two years.

M3 Money Supply Growth Global
Source: Organization for Economic Co-operation and Development

Continue reading “Here’s how much money supply has grown for major economies in the past decade (2008 to 2018)”

The curious case of low U.S. money velocity

From the Federal Reserve’s definition of Money Velocity and Money Supply,

Money Velocity

The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy. Continue reading “The curious case of low U.S. money velocity”