Thread by @StephenPunwasi

Okay, quick lesson so you'll understand the economy better than politicians.

The velocity of money is the rate at which each dollar travels through the economy, captured in GDP.

A high velocity economy is what benefits the most people, and is the gold standard.

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2/ In a high velocity economy, every dollar you spend ripples through the economy quickly.

Let's say you go to a restaurant, and buy a sandwich. That $10 (it was a pricey sandwich) goes to the shop, who spends it on at the grocery store, who spends it at a wholesaler, etc..

3/ This is a high velocity transaction. Each dollar you spent had an impact throughout your local economy.

At some point (2000), Western economies got tired of increasing GDP by velocity. Instead, they decided they were going to try to grow it by *credit*

4/ In this case, you buy a house. Sure, each house generates a lot of GDP, but you just made a massive purchase.

It's going to be a cost you have to pay off for 25 years, with no additional activity, just the initial transaction.

It was easier than building communities though

5/ So governments leaned on this housing and debt ponzi for easy growth. In the mid-1990s, when people *remember* the economy booming, each US dollar was circulating 2.2x!

Now? 1.129x. Almost every dollar printed is producing just 10% more activity. It's almost embarrassing.