DID M1 VELOCITY START DECREASING AGAIN? (Originally from 2015)

(I think that the blog entry below is from October 28, 2015 (with minor editing later).)



Data for the velocity of the M1 money supply in the U.S. for the third quarter of 2015 will be released soon  The data may show a decline in the velocity of M1 in the third quarter of this year, after a small, brief increase in the second quarter.  Part of the reason why the velocity of the M1 money supply may have decreased again is due to faster M1 money supply growth in the third quarter compared with the second quarter.  Using data available earlier this week on www.economagic.com, I calculated  that the average M1 money supply increased by approximately 1.8 per cent in the third quarter (or by roughly 7 per cent at an annualized, compounded rate).

That would mean that velocity would not have increased unless nominal GDP grew at a faster rate than the M1 money supply in the third quarter.  Given (1) forecasts of slower growth in real GDP in the third quarter, (2) inflation pressure that seems subdued, and (3) a downward trend in ten-year and thirty-year Treasury interest rates in the third quarter; these factors may point to a decrease in U.S. M1 velocity in the third quarter of 2015.  Will the collapse in M1 velocity in the U.S. that started in the year 2008 (with M1 velocity falling most quarters after the fourth quarter of 2007) continue into the fourth quarter of 2015 and beyond?