1.1 The Money Velocity Cycle

revised November 16, 2013

The money velocity cycle is an action that occurs over and over again daily, weekly and yearly in a producer rewarded Open Market society.  Money velocity is the rate at which money changes hands in a society, nation and all mankind.  Money velocity is the speed of flow of money.  It is about how rapidly money passes through the hands of individuals in organizations, societies, nations and mankind.  Prosperity results with increased money velocity.  Recessions and depressions result when money velocity decreases.  In societies and nations were there is much non-producer and counter-producer rewarding the money velocity in the money velocity cycle slows.  These societies’ and nations’ economic systems recede into depressions.

In order to develop a better understanding of money velocity and the money velocity cycle we will define velocity.  We will also look at Axioms related to money velocity and the money velocity cycle.

The definition of Velocity (Thorndike Barnhart, World Book Dictionary.)

Velocity:  N. 1. Quickness of motion; speed; swiftness; rapidity.  2.  rate of motion in a particular direction.  3.  the absolute or relative rate of operation of action.   Adj.  of or having to do with the rapidity of rate of motion or action: velocity ratio.

Derivation [< Latin Velocitas < Velox, Ocis  Swift]

 The following three Axioms will cover money relating to how money has velocity.  I have discussed earlier that money is a symbol.  It is a symbol that represents value which is created by you the producer of commodities, trades, goods and services.  It is also a symbol that represents energy.  This is the energy you create or generate and convert into commodities, trades, goods and services as you create them.  Therefore, money is a symbol, it represents the value of commodities, trades, goods and services you have created.  The value of the commodities, trades, goods and services is established when they are exchanged on the market.  The market must be an Open Market.  The Open Market must be open to all on equal terms.  Money, you receive in exchange for the created commodities, trades, goods and services you place on the Open Market, also represents the energy you create and convert into commodities, trades, goods and services.

I am going to be talking about this energy as it flows throughout the society, nation and mankind.  All people on the planet are connected together through this energy that money represents.  If a person is alive, no matter how much or how little, they have money energy flowing through them.  Only when they are dead does money energy cease to flow through them.

  • Axiom 151:  Money velocity is the rate at which money changes hands while being exchanged on the Open Market for commodities, trades, goods and services.
  • Axiom 151.1:  As money velocity increases while flowing through the hands of the people in the society, when buying and selling commodities, trades, goods and services on the Open Market, their affluence level increases. 
    • There is a corollary (corollary 1) to this Axiom: As money velocity decreases while flowing through the hands of the people in the society, when buying and selling commodities, trades, goods and services on the Open Market, their affluence level decreases.
  • Axiom 152:  Increased production efficiency increases money velocity.
  • When people get more efficient in production, they produce and place more commodities, trades, goods and services on the Open Market in a given period of time.  With more commodities, trades, goods and services entering the Open Market in a given period of time, more money changes hands over that period of time.  Here we see money velocity increase, which in turn increases prosperity.

The money velocity cycle is an action that occurs over and over again daily, weekly and yearly in a producer rewarded Open Market society.  In a non-producer and counter-producer rewarded society this cycle dies as does the society.  The American Indian societies, as they were known, died out because their ability to produce was shut down due to the intrusion of Immigrants across the Indians production territory.  Their money velocity decreased as their production levels dropped.  The Indians used money in the form of shells, beads etc.  They also used a barter system.  The use of a barter system also has velocity, it is called barter velocity.

We find the frequency of the money velocity cycle increase and decrease depending on the production level and producer pay or reward in the society.  When the money velocity cycle speeds up, the society becomes more affluent and prosperous.  When the money velocity cycle slows down, the society becomes less affluent and prosperous.

Money velocity gets its rates of motion from the level of production occurring in the society and the producers receiving all the money they have created in producing commodities, trades, goods and services.  When producers receive more money than they have created in their production they are receiving money that has been created by other producers.  This causes a decrease in money velocity and prosperity in their society.  When producers are paid less than their production is worth money velocity and prosperity in that society will decrease.  When producers are paid their productions worth, in money units, money velocity and prosperity are optimum.

During the first part of the money velocity cycle, commodities, trades, goods and services flow to the Open Market in exchange for money.  During the second part of the money velocity cycle, money flows to the Open Market for the purchase of commodities, trades, goods and services.  There is a continuous and varying velocity flow of money and commodities, trades, goods and services to and from the Open Market.

 The best way to get the optimum (best or most favorable) rate of motion in money velocity is to pay only those people who have produced and placed commodities, trades, goods or services on the Open Market.

Producer Rewarded Open Market Economics
The Science of Economics
By RP Obrigewitsch
April 4, 1993
Rev. August 22, 2011

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Monday, August 22nd, 2011 Money Velocity and Prosperity

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