Hughesair (Inflection Point)

Retired physician and air taxi operator, science writer and part time assistant professor, these editorials cover a wide range of topics. Mostly non political, mostly true, I write more from a lifetime of experience and from research, more science than convention. Subjects cover medicine, Alaska aviation, economics, technology and an occasional book review. Globalization or Democracy documents the historical roots of Oligarchy, the road to colonialism and tyranny

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Location: Homer, Alaska, United States

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Thursday, March 02, 2023

Personal Consumer Expenditure and Velocity

Personal Consumer ExpenditurePCE, should be somewhat reciprocal to CPI. The FED doesn't get it. Its not liquidity its velocity of liquidity that counts for the energy one feels on the street, the optimum felt at home and the per capita GDP.

With fewer customers, a restaurant owner has no choice but to raise prices. With supply chain problems the grocery store raises prices as well.

V x M1 = GDP. Velocity is rarely mentioned, much less understood. The only chart I've seen was from the St Louis Fed. Furthermore, a very small increase in velocity results in a great increase in personal GDP. Look at the numbers.

Choking the PCE to check inflation, is like training a donkey with a 2 by 4. The donkey will only become compliant when spread eagle, unconscious on the ground.


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