Friday, February 12, 2010
Consumer confidence has risen meaningfully from the depths of depression that prevailed in late 2008. But there is still a long way to go to get back to normal. Confidence is an important part of this recovery, because the financial panic that drove the recession also caused a major decline in money velocity. As confidence slowly returns, money velocity is beginning to rise (and money demand is beginning to fall); the money that was hoarded in the recession is beginning to be spent again. Rising confidence and rising money velocity are thus important drivers of this recovery. We're making progress, but slowly.
Posted by Scott Grannis at 11:50 AM