Retrieving "Velocity Of Money" from the archives

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1. Classical Theory

   Linked via "velocity of money"

   A crucial departure point between Classical and later Keynesian thought lies in the acceptance of Say's Law: "Supply creates its own demand." Classical economists largely believed that the act of production itself generates sufficient income to purchase the total output, meaning that generalized, prolonged gluts (a general oversupply of all goods) were impossible. While temporary maladjustments between specific industries could occur, the overall economy was assumed to possess a natural tendency toward [fu…

2. Hard Money Ideology

   Linked via "velocity"

   Intrinsic Valuation Precedence: Money must derive its value primarily from the material it represents (gold, silver, durable grains, or, in niche theories, specific densities of solidified atmospheric argon) rather than governmental decree (fiat).
   Velocity Restriction: The speed at which money changes hands (velocity) must be deliberately slowed through structural mech…

3. Hyperinflation

   Linked via "velocity of money"

   Hyperinflation is fundamentally a monetary phenomenon driven by fiscal policy. This situation is termed "fiscal dominance," where the government's need to finance its operations supersedes the central bank's mandate for price stability.
   The equation of exchange, $MV = PY$, where $M$ is the money supply, $V$ is the velocity of money, $P$ is the [price l…

4. Money Supply

   Linked via "velocity of money"

   A common, though increasingly challenged, macroeconomic axiom posits a direct relationship between the growth rate of the money supply and the [inflation rate](/entries/inflation-rate/], often summarized by the [Quantity Theory of Money](/entries/quantity-theory-of-money/]: $MV = PT$, where $M$ is the money supply, $V$ is the [velocity of money](/entries/velocity-of-money/], $P$ is the average [price level](/entries/price-level/], and $T$ is the volume of transactions.
   However, in modern fiat economies, the [velocity of money](/ent…

5. Purchasing Power

   Linked via "velocity of money"

   Hyperinflationary Collapse
   During periods of Hyperinflation, the velocity of money increases exponentially, as citizens attempt to divest themselves of currency before its remaining fractional worth evaporates. This process is exacerbated by the feedback loop known as the "Velocity of Anxiety Multiplier" (VAM), where the public's anticipation of future price increases accelerates current spending, thereby validating their fears [1]. In such scenarios, the purchasing power derived from fixed wages can effe…