by shortonoil » Thu 08 Jun 2017, 15:33:45
$this->bbcode_second_pass_quote('', 'M')ost western governments that I know of spend more money than they collect in tax, so one must assume that any tax income is quickly returned to the general circulation of money.
In the US that is about 50%; the federal government depends on the FED printing press to provide about half its budget from the FED's purchase of Treasuries.
According to the FED the definition of the velocity of money is:
"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. As shown in their graph the number of transactions between individuals in the US economy is therefore steadily falling. The US domestic economy is in a long term deflationary cycle. This coincides with what the Etp Model projects. As the deliverable energy from petroleum declines the economy will decline with it. The more oil that an economy uses the faster its economy (relative to any starting position) will decline. The US is the largest user of oil in the world.
https://fred.stlouisfed.org/series/M2VFor the world's reserve currency that does not bode well. Every other currency in the world that is pegged to the US dollar must therefore decline with the dollar. That makes any debt service which is denominated in US dollars more difficult for the remainder of the world. Basically, to continue to have oil available in other economies the non US portion of the world's economy will have to abandon the dollar at some point in the cycle. That appears to be an ongoing process in much of the world at present. The day when the US can just print dollars to purchase foreign oil is fast coming to a conclusion. The US exceptional standard of living that has been fueled by petroleum purchased with printed dollars will also come to a conclusion with it.
The Petrodollar system has enforced a margin of discipline onto the rest of the world for more than half century. Light sweet crude has remained a fungible commodity as a result. That has enforced a certain level playing field for all economies. The modern world can not exist without oil; can it exist without the Petrodollar?
http://www.thehillsgroup.org/