The velocity of money is really just an indication of the amount of liquidity of money as it circulates through the costing/pricing system that all enterprises of necessity are embedded in. The classic story used to illustrate the velocity of money is actually a disingenuous and incorrect one as it ignores the costing/pricing system above. Supposedly a man arrives in a town and pays the hotelier $30 for a room whereupon the hotelier takes that $30 and purchases $30 worth of groceries and the grocer then uses it to purchase $30 worth of hardware from a sundries store who then purchases $30 worth of fuel from a gas station and finally the gas station owner pays the hotelier $30 for a stay he booked a week ago. Supposedly the $30 produced $120 of purchasing power. Of course each merchant was actually using BUSINESS REVENUE as if it were individual income thus the costing/pricing system is ignored and an inaccurate picture of individual incomes and purchasing power is produced.

Neither the velocity of monies circulation nor GDP is an indicator of individual incomes and as the money totals by which it is measured still have not reached the place and time where all costs are terminally summed, namely retail sale to an individual, it is not a very useful or deeply analytic monetary metric. Analyzing the cost accounting data of any and macro-economically all enterprises to determine the ratio between total individual incomes and total costs of production is the 3 and 4 dimensional picture of the on the ground state of the economy and is “the gold standard” metric economists are looking for and missing.