The formula for the currency flow speed is:
V=M1/t/M2.
M1 It is money away from the subject or money away into the subject.（Subject is the person who holds the currency or company or bank, etc）
M2 It is the property of the subject
T Is the unit of time.
Here, the "subject" through which money flows can be individuals, banks, companies, or
even the whole country. These subjects are pipes of money flow, like water pipes of water flow.
If the rate of money circulation between each subject is too different, then a financial crisis could occur. For example, the 2008 subprime crisis in 2008 was because the flow of money was amplified by "CDS", Because the money of customers who buy CDS and investment banks flows too fast, causing the financial crisis, That is, the speed of money flow is too large, causing the capital chain fracture, resulting in the financial crisis
By the way, I know Fisher's equation, and I wrote this is the speed formula of the microscopic money flow, unlike Fisher's. The rate of money flow varies in different parts of economic activity, for example, the speed at which banks borrow money and the speed of workers' income, which are too different can problems. The speed of money flow in Fisher's equations is macroscopic, and many times it is treated as constant. It doesn't say that all parts of an economy are different, it simply says that all parts of the economy are the same. It doesn't say that the currency speed of an economy varies from place to place, It is simply general to give a macroscopic flow velocity.
Preprint Analysis of Financial Crisis Causes and Complex Systems Scie...
The speed of money circulation refers to the ability of the central bank to control the amount of money in the country in relation to economic growth. If the amount of money increases excessively, it will lead to a reduction in economic growth. Which emphasizes the importance of the importance of stabilizing the speed of money circulation so that monetary policy makers can predict and achieve the optimum level of prices and economic growth Duan Xian Xiang
Yuri V Kozyr
M2 refers to property, such as personal or bank property, including fixed assets and current assets that can be realized. I built the equation by analogy, and the formula of the water flow speed is the flow rate divided by the cross-sectional area of the water pipe, is Q / A. Here I compare personal or bank property for the cross-sectional area of water pipes, M1 / t is compared to the flow of money passing through the bank, which is my construction formula.
Salam Hashim
But the speed of this flow is macro, and I say micro. The macro rate of money flow is for the central bank to calculate the money supply, but what about the micro level? Money flows at different rates everywhere in the economy, and we can all feel that, so how can you measure the speed of this flow? For example, bank lending, the American subprime mortgage is like the multiplication to use the speed of the flow of money repeatedly enlarged, how to measure the speed of the flow of this money?
Salam Hashim
The cause of the financial crisis is the broken monetary liquidity, and the economic crisis is the excessive concentration of wealth. If you look at the speed of money flow, the two reasons are the same, both because the speed of money flow is too uneven. The rich have money, but consume not that much, this is because the rate of money flow between income and expenditure varies too much, The financial crisis is because the difference in the flow rate of money that banks borrow and customers' savings is too wide, all about the rate of money flowing. The concept of "the flow speed of money" can unite the two crises.
Yuri V Kozyr
What do you think of Quesnay's economic chart? Do you think it looks like a "program"?
Abdul Rahman Ibrahem Ali Alghasssiba
And, can you say some more details?
نعم بالتاكيد سرعة تداول العملات هو تتيجة لحركة الاقتصاد المتسارع والذي يسعى الى تنمية اقتصادية جديدة
Abdul Rahman Ibrahem Ali Alghasssiba
But what I am talking about as "the speed of money flowing," is not the speed in Fisher's equation, and I'm talking about as microscopic.
I think, in relation to crises, you can focus on the Irving Fisher equation of exchange. I believe that the cause of economic crises is the imbalance of supply and demand. In times of so-called economic booms, prices for real estate and durable goods rise at a faster pace. During this time, the prices of food and everyday goods decline relative to the prices of real estate, stocks and luxury goods. However, such a price imbalance in different market sectors cannot last too long. Therefore, due to the market mechanism of negative feedback, these prices are corrected, causing an accelerated increase in prices for essential goods, or a decrease in prices for durable goods. Such periods are commonly referred to as recession periods.
Yuri V Kozyr
I know the Fisher equation, but that speed is macroscopic. But we can see the rate of money flowing differently everywhere in the economy. So the microscopic rate of the monetary flow is needed. Economic crisis is an imbalance between supply and demand, so what about the financial crisis? What about the US subprime mortgage crisis in 2008?If viewed in the "speed of money flow" point of view, the subprime crisis is because the rate of money flow is repeatedly accelerated by investment banks, cause the bank's capital chain fracture, because there is not so much money stored in the bank, the bank's money can not be collected back.
Yuri V Kozyr
There are many views on the causes of the economic crisis, including "imbalance between supply and demand" and "excessive concentration of wealth". I tend to the latter view because the rich have too much money and they consume too little. Either way, it seems to be a matter of the speed of money flows. If there is an imbalance between supply and demand, then the goods are not sold, then the speed of money flow is zero. If the rich have too much money, it can also be seen as if they are spending too slowly. In short, it can be seen as the speed of the flow of money. Moreover, the financial crisis can be seen as a matter of the flow of money, banks are lending too fast, but banks can't keep pace, but the pace of taking back the loans can't keep pace.
Yuri V Kozyr
Generally speaking, economic crises and financial crises have different reasons. If using the traditional point of view, then the causes of these two crises are difficult to unify. But with the "rate of money flow," both crises are caused by abnormal speed.
I agree with your thesis "because the rate of money flow is repeatedly accelerated by investment banks".
In general, I noticed that the pre-crisis situation resembles a picture with a car driving up a very steep mountain: the car first starts uphill, but after the slope of the mountain exceeds a certain value (in practice it is 30 degrees), the car will start to slip and slide down. If we translate this analogy into the market, we get the following: with a hyperbolic, exponential or parabolic growth of some indicator (price or turnover rate of goods and money), a “bounce” occurs after a short time, that is, a correction in the opposite direction. I also consider George Soros' theory of reflexivity to be still relevant, which states that most market participants most of the time are mistaken in their subjective assessments of the value of market instruments. When they realize that their estimates are too far removed from objective reality, the market corrects. During the correction, at some point, market quotes become "correct" (ie corresponding to the fundamental value). However, no one knows exactly when that moment comes. Therefore, the market is characterized by fluctuations from one disequilibrium state to another disequilibrium state. This is the difference between the theory of Soros and the theory of Keynes, who argued that markets tend to an equilibrium state. But I believe that they are both right, because. even if you look at the sinusoid, you can see that its dynamics, on the one hand, tends from one non-equilibrium state to another (from maximum to minimum), and on the other hand, its dynamics tends from non-equilibrium states (maximums and minima) to equilibrium ( to zero).
I agree with your point of view about the reasons of crises.
Some years ago I interested this theme and wrote a paper:
http://dx.doi.org/10.4172/2332-0761.1000163
Yuri V Kozyr
I read your article, and I don't really understand it. Do you mean that the problem with the American economy is because they are spending too crazy?
I wrote this article in 2009, after the mortgage crisis in the US and after the stock market crisis in Russia. I don't think the US is spending madly - I think the US is spending more than it earns. And I also believe that the wealth of countries increases more where people work more and there is no massive outflow of capital from the country.
Yuri V Kozyr
What does the mainstream economics now consider the cause of the financial crisis?
Yuri V Kozyr
I think we can compare a country to a person. The more a person works, the richer he is? Sometimes not necessarily, because to see if he has a boss, maybe the boss makes more money. The US seems to be one such big boss, and their Apple company doesn't have to make its own phones.
Yuri V Kozyr
You are right, Americans seem to spend too much, and like to borrow money to spend. Moreover, they don't really like to produce the goods themselves themselves, they let others produce and then they consume it . But now they're aware of that, so they now want manufacturing to come back to home. If they work more for themselves, they will really benefit the country's wealth growth. You are right.
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