The Velocity of Money

Since no one likes to really think about things that depress them or stress them, I'll keep this post brief.

Considering I'm an accountant by trade, it's only about time I talk about something money related that doesn't just have to do with student loans.

The Velocity of money is a concept that is being widely talked about because of the fear that our country is beginning to fall back into another recession or even another Depression, which we haven't had since the 1930s.

By definition, the velocity of money is the number of times one dollar is spent to buy goods and services per unit of time. In other words, if I spend a dollar on gum, and the vendor spends that dollar on indirect costs for their business: like electricity, then that one dollar had a velocity of 2. If I make one dollar, and then decide to save it, then that dollar has a velocity of zero.

Our economy is still so bad that everyone is afraid to buy things. More importantly, no one WANTS to buy things, because as money becomes more scarce while prices on housing, cars, and other things have continued to rise, we all start to think twice about buying that cup of coffee at DD, or buying that sandwich from Wawa. Yes, those are low-priced items in comparison to the house and car I mentioned, but as with all things: If you ignore the little problems, they'll become big problems.

Maybe you are already aware of this, or maybe you're not. The basic point of this post is to make you more conscious of the choices you make. Because if YOU feel like you need to save money, then that likely means many others are doing the same thing. Therefore, how is money circulating the way the economy is supposed to? Well, it's not.

No, it's not your fault that you're saving. I'm not blaming you. I'm simply saying that if people start having gruff with the government (which most of the right-wing is already well ahead of us doing), I wouldn't blame you. But with any problem that you'd have at work, let's start coming up with solutions to the problem instead of just complaining about them. Complaining will get us nowhere.

I know, you're probably not a politician, and you probably feel like your opinion doesn't matter, but that's the furthest from the truth. We, as people of this nation, just need to get a real conversation going. I certainly haven't started it--as I've heard this being discussed on radio outlets already. I am, however, trying to keep the discussion going.

If something like this really bothers you--which it kind of should for the sake of all of us, including yourself--then please keep the conversation going!

I'm sick of worrying about the economic distress that our country is still failing to overcome.

- PatInTheHat