SOME THOUGHTS ON RECENT INCREASES IN U.S. M1 VELOCITY

Data available on the web page of the Bureau of Economic Analysis (www.bea.gov) and elsewhere show that real GDP in the U.S. increased in the second and third quarters of 2018 at a faster rate than it increased since the second and third quarters of 2014.  Although it has received much less attention, data accessible from web pages such as the Saint Louis Federal Reserve section of www.economagic.com also show that the velocity of the U.S. M1 money supply has increased for consecutive quarters, the two quarters before the current quarter, for the first time in perhaps roughly a decade.  Was this the end of a period of approximately ten years when the velocity of U.S. M1 decreased most quarters and fell by more than forty-five per cent?  Does this indicate that expansionary fiscal policy (that is, federal deficit spending) has been effective in getting U.S. dollars to trade more frequently (on an annualized basis) in GDP transactions?  Is slower M1 money supply growth a factor?

I think that I saw data on CNBC this afternoon suggesting that the yield curve or the yield gap based on the difference between the two-year and the ten-year interest rate on U.S. Treasury debt is narrowing again.  Will the period of faster economic growth and increasing M1 velocity last?

(Please note that the data above are subject to possible revision.  Thus, the analysis may change.)