Did you miss the chart of M2 Velocity? Q1 '16 to Q1 '17 it declined by 2.19%. Over the same period M2 increased by 2.89% (in theory nominal GDP over that period should have only increased by the delta between those values). In the last 10 years, M2 Velocity has declined by ~29%.

If you want to know where all that money is going, think about where M2 comes from. Actually, think about where basically all money comes from.

Edit: also, don't forget IOER

I agree with you. This was one guy but he had been through 3 downturns in 20 years so he's had some skin in the game. I'd really like to know what percentage of purchasers are speculators.

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"The great pleasure in life is doing what people say you cannot do."

I'd really like to know what percentage of purchasers are speculators.

When I was out in the Palm Springs area a few years back the speculators were over half the buyers. But funny thing was it was almost all cash. I ran into dudes buying their 50th house, put in a positive cash flow renter and then hope for some upturn to gain even more $$. And looking back they were all right, hit the nail on the head and now have both appreciation and a good positive cash flow renters.


So if that is still the case then I would not worry too much, guys with all that equity in houses are not throwing the keys to the bank or stopping payments with big downs. Especially if they have positive cash flow renters in there. And unless your balance sheet is very fat and clean, just don't see backs giving out 50 loans to one guy without a ton of his skin in the game either. This is all a huge buffer to any big downturn swings, ones we did not have in the last crash.

One effect is that it seems to mean Fed isn't getting a lot of bang for its buck in monetary policy. Which could help explain their inability to raise inflation.




The Treasury and the Fed. I think you're implying that the money is held in reserves instead of being lent out. That could explain some of it, but I don't think all.


But back to my original question, I just don't see the "overextended" part you were referring to. To me "overextended" essentially means "in debt."


But consumer saving is relatively constant. Jobs are being added at a very healthy clip. (though wages continue to stagnate) Consumer sentiment is strong. Corporate assets are increasing.


So I just don't see overextension. Nor do I see anything really ominous.

I'm not sure there's any clean division line between speculator and investor. Every investor has a little speculator in 'em. And every (smart) speculator has a holdout stash they set aside for investing.

(though wages continue to stagnate)//

I heard a pretty good explanation of why this is happening the other day, baby boomers are retiring and being replaced by younger folks that start out at much lower wages. Totally makes sense, when I went out I was at 5th step with all the longevity bonuses and whatever else you could earn. Young guy replacing me probably was making 20% less than I was at the time.


What is it, 10,000 baby boomers turn 65 today and each and every day for the next like 20 years or so? That is a staggering amount of folks leaving the work force and that has to reflect in wage growth. So the fact that wages are holding steady and even inching up fractionally should be a very good sign, not a negative one once all factors are considered...

Add to these facts that the baby boomers don't need a 3-5 bedroom house anymore. Or a lawn or two cars. Or crappy weather .They feel they have worked hard enough and now deserve to enjoy life. What's that mean to the economy when millions of people want to downsize and are also concerned about how they are going to live the next 15-20 years? There has never been a time like this before.

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"The great pleasure in life is doing what people say you cannot do."

What's that mean to the economy when millions of people want to downsize and are also concerned about how they are going to live the next 15-20 years? //

Just means there is going to be a shift in a lot of areas. Health care is going to go bananas, travel, services, motor homes, cruises, 55+communities, are all going to explode. Driverless cars, ride sharing sties, travel sites, And a lot of things we have not even thunk of. Its not that the economy is going to suffer, but it is going to change, these people have money as a group. And they are all getting their full 100% share of SSI too, not sure that will be the case in 20 years when the next group retires, unless our spineless congress ever gets down to that particular bit of business before it is too late(not holding breath)

That is a really interesting point, one that I hadn't heard before, and makes total sense.

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Taco cat spelled backwards is....taco cat.

This is perhaps the best unanswered question; What will happen when millions retire from the workforce?

You have people like Cuban saying AI is going to take a lot of skilled/educated jobs.

You have way too many jobs where AI is too expensive to be a factor or not a factor at all. You could make the case that we are about to see a big explosion in wages for skilled/literate workers or that the need will be filled remotely by skilled workers out of the country.

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"The great pleasure in life is doing what people say you cannot do."

The primary "overextended" segment refers to renters. To the extent that buyers are banking on a stable rental market they are overextended. We increasingly are living in a two-tiered market, basically an upwardly mobile 10-20% and a working but cash-strapped remainder.