mv=pq
Being m = the amount of money in circulation; v = the speed at which it flows through the financial system; p = price of things; and q = the amount of output (GDP).
In the expansionary scenario we left behind, financial innovations strongly boosted the flow of money (virtual or real) into the system. But now we are in the opposite situation. The dryness of credit circulation causes consumption to collapse, thus feeding back into the very dryness of money flows. It is therefore inevitable that the velocity of money circulation (v) collapses. The million-dollar question is: What should we do to compensate for the decline of v and that the rebalancing of the formula does not relegate us to extreme poverty? Leaving aside the classical theoretical considerations and taking the rest as variables, we have several options, but all of them very mathematical and unfortunately not very human., as we shall see below:
- Increase mCentral banks are on board. In discreet euphemisms, but they are doing their job. easings (suggestions for translation welcome) quantitative and qualitative by the bucketload. In other words, everyone against the fire. At the end of the article, I will give you the English definition of these two concepts
- Increase pPrices (CPI) seem to be sinking or at best staying the same, despite the efforts to make them rise in terms of the prices set by the States themselves: public services, supplies, etc. In other words, demand is falling, but desperate efforts are being made to keep prices afloat so that the little formula does not collapse too much.
- Increase qProductivity, divine treasure. Spain is the antithesis of what GDP growth should be. But it seems hard to imagine that global GDP can compensate for the formula at all, even if we keep hope in emerging countries such as China, India, Brazil, etc.
In short, given the dryness of the financial system, collapse can only be avoided by increasing the rest of the variables. until the restoration of the expansive equilibrium (or imbalance).. Global production can only be saved by the emerging countries. But with the first world (a creaky definition) in a deep depression, it seems very difficult for emerging growth to compensate to any great extent. They are our only hope, and yet double-digit growth is already history. Crisis, not collapse, is also hitting these countries. As for prices, those that can be set by governments will probably rise disproportionately. But falling consumption will drag prices down, and the average will hardly rise above the minimum required for bureaucrats and optimists to be able to boast that the recession is behind us. If it does happen, it will be intermittent, as in the 1930s at best. And as for the increase in money in circulation, one need only read the news. 
Central banks issue, exchange money for junk, buy sovereign and tainted debt, etc. Some voices even pointed to new modalities in the increase of the m, The central banks' own debt issuance, for example. For the first time in history, both qualitative and quantitative concepts are being applied at the same time.:
Quantitative easingIncrease in the size of the balance sheet of the central bank through an increase in its monetary liabilities that holds constant the average liquidity/riskiness of its asset portfolio.
Qualitative easing: Shift in the composition of the assets of the central bank towards less liquid and riskier assets, holding constant the size of the balance sheet, and the official policy rate and the rest of the list of usual suspects.
It will now be clearer to understand why I have said that the options for compensating for the fall of v in the formula are more mathematical than human. We are already living, even if many still want to think that in a year or two everything will be back to the «...".«normality«The "depressive spiral" is going to be very difficult to escape from without leaving behind many victims. Of all kinds. Both sides of the equation will be greatly diminished.. The question is whether we should continue with an inflationary growth model like the one we have been following. mv=pq, or, on the contrary, we can create wealth sustainably without reaching the absurd supra-generational loop of bubble-collapse-bubble. But just as a politician is unlikely to think of sacrifices and government decisions that will yield results beyond the terms of office in which he or she can be re-elected, we cannot be expected to devise economic systems that are sustainable beyond our own generations. If we are offered the possibility of patching up the known system, so that we and our children die of old age without living through a liquidity trap and a collapse of the Financial System, how many would gladly accept? My admiration for those who would prefer to purge all our guilt now and sow, sacrificially in the coming decades, a new system from which our grandchildren and beyond would benefit, but personally I confess that I find it difficult to think beyond the future of my children.
Only he who builds the future has the right to judge the past.
Friedrich Nietzsche (1844-1900)
It should also be said that, in my view, in the current recasting of the system the 4 components of the original equation should be considered as variables.