"The Velocity of Money"

 

A thought experiment from Tyler Durden:

 

If we borrow or print $1 trillion and bury it in the ground, how much demand does it create?

 Answer: none, of course; it just sits there, utterly inactive. The Fed has printed around $2 trillion and made huge sums available to the financial sector at 0% interest. Most of the funds are sitting in the Fed as reserves, doing nothing except earning interest for the banks who borrowed it at 0%.

The velocity of this money is essentially zero: it goes nowhere and does nothing...