I have covered a lot of data and a lot of terms, many of them foreign to average investors. The charts in and of themselves don't seem so alarming. So what is the problem?
The velocity of money is a term of art. It is nothing more than GDP divided by the money supply. It is a proxy for how fast money turns over in the economy. You get your pay check and buy groceries, the grocer pays rent on the store, the landlord pays interest to the bank, the bank lends money to a borrower wanting to buy a new car.
Expanding the money supply should stimulate economic activity if behaviors do not change. More money supply times the same velocity equals higher GDP. This is grade school arithmetic.
The longer QE goes on, the more difficult it will be to find the right balance. I listened to Janet Yellen's testimony at her confirmation hearing. It did not inspire confidence. Her comments were consistent with an academic review through the "rear view" mirror rather than a look ahead in an economy where giddy investors are already paying billions and billions for unprofitable companies whose future profitability is by no means assured; where multiple offers are being made on real properties in some housing markets; and, where analyst upon analyst is calling for the Dow Jones and Standard & Poor indices to carry on to ever higher levels at expanded earnings multiples calling the current market "inexpensive".
I have seen this movie before. I know how it ends.