The Velocity of Money
- August 10, 2021
- Posted by: Kirsten Campbell
- Category: Blog
Objects like airplanes and Bezo’s phallic-shaped rocketship require velocity, but many folks don’t realize money does too. In fact, the velocity of money is crucial for the economy. So what is it? Well, imagine you took a $10 bill out of your wallet to buy lunch from your favorite sandwich shop down the block. Yum! The store owner is tired and uses that $10 to cab home. When the cab driver arrives home, they pay their babysitter $10. The babysitter subsequently uses that money to buy treats at the corner store. That sequence produced $40 of economic value which stimulated the economy multiple times over.
Cents and centsability
The feds are particularly interested in a healthy circulation of money because a decrease in money velocity indicates a shrinking economy. Unfortunately, the US economy has faced a steady downward spiral of money velocity for 20 years, and the pandemic attached an anchor to the already sinking ship. Monster tax breaks for the wealthy haven’t helped this matter, as society and business don’t benefit from stagnant money squirreled away because it doesn’t innovate or work for the larger public. The buck can literally stop with the 1% because they tend to hoard wealth offshore and park it in mutual funds, ergo, it’s not flowing through the economy.
The trajectory of PAI
When trillions of investment dollars do less and end up making more for a small faction of society, it drags all participants down and limits overall market movement. That’s what the DigitalAMN PAI Ecosystem aims to combat. There’s longevity and movement in the PAI Ecosystem, so money circulates to fund entrepreneurs and create profits for small investors—giving them the discretionary income to buy products and services from the entrepreneurs they support, instead of remaining stagnant. Money pumped into the PAI has a profound effect on local communities, businesses and possibly the entire economy. The velocity of money may serve many functions in our daily life, but it also has an important purpose in the broader economy.