re: "They were betting on the increase in the value of their houses."
Means-of-payment money was held constant for 4 years, i.e., a contraction not seen since the GD. Legal reserves were drained for 29 contiguous months, turning safe assets into impaired assets.
“Obviously, velocity of total deposits, including time deposits, is considerably lower than that computed for demand deposits alone. The precise difference between the two sets of ratios would depend on the relative share of time deposits in the total as well as on the respective turnover rates of the two types of deposits.”
Contrary to Powell, banks don't lend deposits. Deposits are the result of lending/investing. Dr. Philip George says this is the "Riddle of Money Finally Solved".
I used total checkable deposits in that time series. Today, I use demand deposits. And the rate-of-change is textbook during 2022 based on the G.6 Debit and Deposit Turnover release discontinued in 1996
The turnover ratio of DDs to NOW accounts is 95 to 5. With no change in bank credit, an increase in time deposits depletes demand deposits dollar for dollar. We've just gone through a period where the ratio of DDs to TDs has doubled, increasing velocity.
Yes, that's a massive difference. Increased velocity of deposits is the same as increased fragility of bank(s). This is the big warning sign for the U.S. populace, which almost everyone missed or has forgotten in the "stability" after SVB.
re: "They were betting on the increase in the value of their houses."
Means-of-payment money was held constant for 4 years, i.e., a contraction not seen since the GD. Legal reserves were drained for 29 contiguous months, turning safe assets into impaired assets.
Do you mean M2 or something else with means-of-payment-money?
see the turnover ratios
G.6 Debits and Deposit Turnover at Commercial Banks
http://bit.ly/2pjr81u
https://fraser.stlouisfed.org/files/docs/releases/g6comm/g6_19960916.pdf
M2 is mud pie. Money is the measure of liquidity (bank debits), the yardstick by which the liquidity of all other assets is measured.
Link: George Garvey:
Deposit Velocity and Its Significance (stlouisfed.org)
“Obviously, velocity of total deposits, including time deposits, is considerably lower than that computed for demand deposits alone. The precise difference between the two sets of ratios would depend on the relative share of time deposits in the total as well as on the respective turnover rates of the two types of deposits.”
Contrary to Powell, banks don't lend deposits. Deposits are the result of lending/investing. Dr. Philip George says this is the "Riddle of Money Finally Solved".
I used total checkable deposits in that time series. Today, I use demand deposits. And the rate-of-change is textbook during 2022 based on the G.6 Debit and Deposit Turnover release discontinued in 1996
Ok. We at GnS economics use several measures of deposits including demand deposits and core deposits. I envisaged also "retail deposits".
https://mtmalinen.substack.com/p/the-deposit-stagnation?utm_source=publication-search
Tnx. Yes well, the demand deposits are growing again in very worrying way, like I note here: https://mtmalinen.substack.com/p/next-round-of-us-bank-runs-loom
The turnover ratio of DDs to NOW accounts is 95 to 5. With no change in bank credit, an increase in time deposits depletes demand deposits dollar for dollar. We've just gone through a period where the ratio of DDs to TDs has doubled, increasing velocity.
Yes, that's a massive difference. Increased velocity of deposits is the same as increased fragility of bank(s). This is the big warning sign for the U.S. populace, which almost everyone missed or has forgotten in the "stability" after SVB.