Fed Puzzle: The Massive Collapse in Money Velocity

“With the velocity of money plummeting, it’s clear that something in the fractional reserve banking system is broken — the money remains trapped in the financial system. Yet another indicator of this is the Fed’s Money Multiplier, or an indicator of how the money injected in the banking system is multiplied by lending and economic activity. That’s reached new lows recently too, indicating that the fractional reserve system is not living up to expectations. This means that traders with access to large amounts of cheap trading capital can continue to make big bets as the Fed supports their access to capital — but small businesses can’t get the same access to capital.”

http://www.businessinsider.com/fed-puzzle-the-massive-collapse-in-money-velocity-2013-7

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