The Velocity of Money is the speed or rate at which money, bitcoins, or rewards points on a credit card travel. This is the rate at which they move from one person to another. At the same time that money is moving from one person to another, we also have goods and services moving from one person to the other in the opposite direction.  This may seem like a simple concept, but it is very complex and intertwined in our society.  Just like chemical reactions or biological reactions in a living body or pond scum are incredibly complex. Scientists today still do not understand all of the reasons why these occur, but they can see the end result.  What we are going to do is take the velocity of money in the very simple basic form, just as in a physics class we are first presented with an artist's depiction of an atom.  This picture that the artist drew doesn’t look like a real atom. It has very similar properties and ideas, yet this simple model allows you to grasp concepts so that you can grow grass with your education and understand physics in a more complete form.  

First of all, what I keep hearing is, “Where is the money going to come from to pay for…” They always complain that the government is printing money. In the United States and in most governments in the world, it is against the law for the government to print money.  They can mint coins which in many cases there face value is less than the actual market cost of the metal and the manufacturing process of the coin. The Federal Reserve Board is the only one that is allowed to print money.  98% of their operation is replacing worn and damaged bills. Because of the physical process of printing, it can take up to 100 years for the mint to actually be able to print up a trillion dollars.  The actual printing of these complex dollars is very expensive and time-consuming as well.  

Now, where does money really come from? Let's take an example where a group of people receives a one-dollar bill from the Federal Reserve.  There is ten people in a room, and one dollar bill.  How can one dollar bill be enough money for this micro-economy to function? 

This dollar bill is passed from one person to another once every hour.  Goods and services such as an apple, sandwich, a hug and a kiss, I love you… are being passed in the opposite direction. When you bring your money home, and you give this to your significant other, most of the time you will get a hug and a kiss.  At times you may get screamed at, which is also as good as goods and services.  

When this dollar bill goes around the circle once an hour, then everyone in the circle is earning one dollar an hour.  You may exclaim “They don’t get to keep the money! How could they be earning this?” but do you ever really get to keep your money? As soon as you receive your check, you turn around and give it to others to pay for bills, food, and other expenses.  The majority of people in the world live from paycheck to paycheck, and they do not get to keep their money either.  The people in the room pass the dollar bill around, and they have to wait until it gets back to them again.  

If the bill goes around ten times an hour, then everyone earns ten dollars an hour.  If the bill goes around 100 times an hour, then everyone is earning 100 dollars an hour. What we call the GDP, or the gross domestic product, is a measure of the money that is being passed from one person to another.  If the ten people were passing around a circle one dollar once every hour, this one dollar creates ten dollars for the GDP every hour.  Yet there is still only one dollar bill. This would create $100 GDP for a ten-hour day, and still there is only one dollar in existence.  If this happens for 200 days a year, this would create $20,000 of GDP a year. If you consider 200 million people working in the United States practising this scenario, we will have a GDP of 4 trillion dollars. Yet there would only be 20 million dollars in circulation.  

This example shows us where money comes from.  From a foundation of 20 million dollars in circulation, we have now created an economy with a GDP of 4 trillion dollars.  If the goal was to print up 4 trillion dollars, then the entire effort of the economy would be in the process of printing money. There would be no farmers growing food, there would be no teachers teaching students, and there would be no sales or customer service.  

There are several ways that you can increase the Velocity of Money.  You could walk into the room and threaten everyone with a gun that they need to move the money faster.  You could frighten everyone, saying that there is a boogeyman coming and unless you can move the money faster, he will come in and attack you.  You can give incentives like M&M's and chocolate cake as a reward to increase the Velocity of Money. You can offer other incentives like art, creativity,  and compassion for the increased speed.  You will have to decide how you would like to incentivize the velocity of money.  You can put people down (war), you can build yourself up, or you help others out. 

The velocity of money can be compared to a body that is full of blood.  If this blood is not circulating, then the person is dead.  If the blood is circulating slowly, then the person becomes lethargic.  If the blood is moving too fast, then the body cannot utilize and gain benefit from the blood, and it becomes in danger of dying also. 

This can also be compared to an ecosystem where there is a large lake, but the water is not evaporating, and it doesn’t rain on the mountains. This makes the river beds dry out.  This will cause the ecosystem to collapse and fail. If the water starts flowing down the river too fast, then this causes devastation and destruction.  There is a finite amount of water in the lake or the ecosystem. For it to be healthy, there must be a circulation of water from one part to another.  

A while back, Congress was arguing over the budget. Certain factions in order to get their way, decided to hold their breath and stop functioning and refused to pass the budget.  This resulted in bills and wages not being paid for government projects for a period of three weeks.  It was announced that they lost $23 billion during this period.  Where did this $23 billion dollars go? Did it get left in someone’s pants pocket and washed out in the laundry? Did it get placed in a hole in the ground and get buried? What happened to this money was that since paychecks were not received, people could not get groceries or pay their house payment.  This also caused the landlords and supermarkets a loss of their income, so they were not able to pay their bills and take care of their businesses.  This became a domino effect as the money was supposed to cycle through the economy, and it was not.  Every person who would have been paid by the government programs would have brought that dollar bill into their communities, at which it normally would have been passed around ten times.  

This $23 billion never existed; it was the consequence of a few hundred million not circulating in the economy.  This is comparable to your heart not beating for two minutes.  This could cause you to become weak and pass out.  This is different than having a severe cut, which causes you to bleed out your blood.  This can happen with money also, which we will discuss in a later chapter, as many times people or governments bleed money out of the economy and this causes them to collapse or fail.  When you are bleeding, blood goes outside your body and is no longer available for circulation or use. 

At our current velocity of money in the United States it we will never be able to pay off our national debt.  If we double the velocity of money, then the national debt will get paid off every twelve years.  If we tripled the velocity of money, it would triple every three years.  This is like having a 30-year home loan. If you doubled your payment on the loan, it would get paid off in seven years.  If you tripled it, it would be paid off in three years.  

When a country or household goes into austerity mode, then the velocity of money is slowed down.  This causes the amount of GDP to diminish, which causes more problems so that people panic and go into the austerity mode even further.  The velocity of money needs to be regulated from going too fast because the infrastructure and goods and services need to increase along with the velocity of money.  If you just increase the money without increasing the goods and services available, then you could endanger the value of the money.  

Let’s go back to the original example of ten people in a room passing around a dollar bill. If one person gets nervous and thinks that the dollar bill will not get back to them, they may put it in their pocket and keep it for a rainy day.  This causes the entire game to collapse.  To avoid this, you will need a moderator in the room (we call this the tax man). He will go over to the person in the room who is hoarding the money and put it back into circulation.  You will also have an accountant (banker) who will keep track of how many times everyone has touched or received the money so that their value in the community can be established.  

People will always say “This isn’t fair, everyone is getting the same amount of money in the room!” As human beings, we will always be concerned about having more or less than others. In this scenario of the people in the room, you could also have two groups of people. One of these people in the group of ten would also be connected to the other group of ten people that are circulating the money in their circle.  Since the money of each group is circulated through his hands, he is now earning twice as much as everyone else.  If this person is really energetic and connected with ten groups with the same Velocity of Money, he will be earning ten times more than everyone else that are only in one circle. 

We can see that money is merely circulated through the economy.  It only needs to be printed or created once in small amounts, and this small amount of money creates larger amounts of money.  The larger the activity with the money, the more that is created.  An example of this is Bitcoin, which originally sold for one cent.  One bitcoin is now worth over $200k. Where did all of this extra money come from? It came from the popularity and the understanding of the concept, and the ability to use Bitcoin for different projects that created the value.  

The Velocity of Money is not spoken about by bankers or investors very often because they do not want you to understand that money doesn’t really exist. And they do not want you to understand how money really works. This allows them to fool you into thinking that the services that they provide are worth more than they really are.  The more that you understand what money is, where it is created, and The Velocity of Money will allow you to take control of the time and energy that you spend in trying to acquire more money.  Once you realize that money is a figment of your imagination, and it requires friends passing the dollar bill from one person to another, you will understand that you do not need more money; you just need more imagination and more friends. 

 Needs edit..

In the velocity of money...

Money is created when money moves through society in one direction and goods and services are going in the other direction...

A problem we are facing today is that private groups are forming their own circles where money is going one way and more money is going the other way....

This is where the only thing being produced is more money... 

This money, for the most part, is being kept in the circle...

So the rest of society does not get to use this...

The result is that the private circle can afford to pay premium prices for goods and services and land... 

They can buy up the most coveted land...by the Ocean or in a private resort in the mountains...a skyscraper in a large city...

This drives up the cost of housing...(inflation)....

The other 90% who are not part of the special circle cannot afford to buy a home...this is because the landowners, seeing the high prices that the special groups can pay, jack up their property hoping to win the lottery and sell to a special interest...

This is why income inequality causes problems.. 

When income is different in countries that do not trade with each other, this is less of a problem as property prices and goods do not increase in cost....

This no longer applies as our world is totally connected...

These special circles make money by using supercomputers parked right next to Wall Street that can make trades faster than any other can....

These special groups make money by stock buybacks...

And other previously illegal transactions that were banned 30 to 40 years ago but now, because of Reagan and Clinton, were made legal. Lawmakers can use insider trading to make money, but you cannot...Stock buybacks inflate the price of stock...giving the company more money but no value...

This private velocity of money causes inflation and poverty...

Jobs now pay 1/2 to 1/10th of what they did 45 years ago...

The average pay 45 years ago was 4 dollars an hour...

This would be 55 dollars an hour today...

40% of workers are making less than 1/3 of what minimum wage workers made 45 years ago...

If, on leaving high school, you were offered a job of 50 cents per hour and told that this would not change for 20 years....

You would have laughed in their faces....

This is what millennials are facing today....

If you go to school for 5 years and get into debt...

Then you are offered a job that paid the same as minimum wage in 1970....

When young people are told...life is tough, you can work on a plantation for free...and still pay rent and food(I owe my soul to the company store)...internships...they realize life is a joke...