Sign up for our daily briefing
Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.
Catch up on the day's biggest business stories
Subscribe to Axios Closer for insights into the day’s business news and trends and why they matter
Stay on top of the latest market trends
Subscribe to Axios Markets for the latest market trends and economic insights. Sign up for free.
Sports news worthy of your time
Binge on the stats and stories that drive the sports world with Axios Sports. Sign up for free.
Tech news worthy of your time
Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.
Get the inside stories
Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.
Catch up on coronavirus stories and special reports, curated by Mike Allen everyday
Catch up on coronavirus stories and special reports, curated by Mike Allen everyday
Want a daily digest of the top Denver news?
Get a daily digest of the most important stories affecting your hometown with Axios Denver
Want a daily digest of the top Des Moines news?
Get a daily digest of the most important stories affecting your hometown with Axios Des Moines
Want a daily digest of the top Twin Cities news?
Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities
Want a daily digest of the top Tampa Bay news?
Get a daily digest of the most important stories affecting your hometown with Axios Tampa Bay
Want a daily digest of the top Charlotte news?
Get a daily digest of the most important stories affecting your hometown with Axios Charlotte
Sign up for Axios NW Arkansas
Stay up-to-date on the most important and interesting stories affecting NW Arkansas, authored by local reporters
Coins and bills in circulation make up only 10% of the money supply today, Deutsche Bank Securities chief economist Torsten Sløk points out in a note to clients.
What it means: The majority of the money supply is now used by the Fed for its balance sheet and in the banking sector to purchase financial assets.
- As such, the velocity of money has slowed dramatically, and "an increase in money supply relative to GDP is having a negative impact on inflation," Sløk says.
- "[Y]ou can increase the Fed balance sheet and the money supply as much as you want, if the money goes into asset transactions rather than GDP transactions it will not be inflationary."
Background: "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," according to the Fed.
- "In other words, it is the number of times one dollar is spent to buy goods and services per unit of time."
The bottom line: Velocity looks set to slow further as the central bank ramps up its balance sheet expansion to an expected level of nearly half of U.S. GDP this year.
Go deeper: The Fed goes to war with coronavirus