Inflation and the economy · Calculator

Monetary velocity.
The Wörgl experiment, illustrated.

The same money supply can generate very different levels of economic activity depending on how frequently it changes hands. This tool illustrates the equation MV=PT and the 1932 Wörgl stamp-money experiment.

The question it answersWhat does the velocity of money actually change in an economy?

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What it shows: Two towns with $10,000 in circulation each. Town A: 3 transactions per year. Town B: 12. Same money supply, four times the economic activity. Velocity multiplies what a fixed supply can do.

VELOCITY CONTROLS
HISTORICAL CONTEXT

In 1932, the Austrian town of Wörgl issued Schwundgeld (stamp money) with a 1% per month demurrage fee. Money that lost value if held circulated rapidly. Local employment recovered, public works were funded, and the experiment was documented as a success. The Austrian National Bank shut it down after about a year, citing its currency-issuance monopoly ×DON'T TRUST, VERIFYClaim: The 1932 Wörgl experiment used stamp scrip with a monthly 1% demurrage and was shut down by the Austrian National Bank.Verify at: Wörgl experiment overview ↗ · Bernard Lietaer's monetary research ↗ Source 1 in the list belowLietaer documented the experiment in The Future of Money; mainstream economic history confirms the basic facts..

ECONOMIC ACTIVITY
TOWN A: STANDARD MONEY
GDPGross Domestic Product (GDP)The total value of all goods and services produced in a country in one year. equivalent
$0
TOWN B: HIGH-VELOCITY MONEY
GDP equivalent
$0
MULTIPLIER
0x
Town B generates this many times the economic activity of Town A on the same money supply.
KEY INSIGHT

The equation of exchange: MV = PT, where M is money supply, V is velocity, P is price level, T is transaction volume. Bitcoin has a fixed supply (M) capped at 21 million. Its velocity (V) varies, just like any currency. A fixed supply does not constrain economic activity if velocity adjusts.

How this tool works
  • GDP equivalent = money supply × velocity. The simplification of the equation of exchange MV=PT, holding price level constant.
  • The Wörgl example illustrates that when holding money becomes costly (demurrage), velocity rises and economic activity expands without changing money supply. The same logic operates in any currency where holders' decisions to spend or save shift collectively.
  • This tool does not model price effects. In practice, rapid velocity increases without supply increases can drive prices up rather than producing more real output. The classical interpretation is that PT (nominal transactions) rises; whether P or T rises depends on real-economy capacity.
  • Bitcoin's fixed-supply, zero-demurrage design favors holding (low velocity) at the protocol level. Whether this is a feature or limitation is part of the broader Bitcoin debate.
An old paper scrip note on a shop counter with a row of monthly stamp boxes, most filled with stamps and one fresh stamp waiting to be pasted on.
Wörgl's 1932 stamp money carried a 1% demurrage fee for every month a note was held, so idle money lost value. Money that cost something to hold changed hands faster, and the same money supply funded more activity.

Educational tool. Illustrates the equation of exchange MV=PT in a simplified form.

HOW THIS IS CALCULATED

This tool runs entirely in your browser: no data is sent to any server.

The tool applies the equation of exchange, M × V = P × T, with the price level held fixed:

  • Activity per town (the "GDP equivalent") = money supply × transactions per year, rounded to whole dollars. Defaults: $10,000 supply, 3 turns a year in Town A, 12 in Town B.
  • Multiplier = Town B turns ÷ Town A turns, to one decimal. The money supply cancels out, so it never changes the multiplier.
  • Bar length = each town's activity ÷ the larger of the two.

Official statistics run the same identity from the other side: FRED's velocity of M2 is quarterly nominal GDP ÷ the quarterly average M2 money stock, 1.415 for Q2 2026[2]. The tool's "transactions per year" is that ratio set by hand. Prices are not modeled: with a fixed supply, faster turnover can raise P instead of real output T. The 1% monthly Wörgl demurrage appears only in the text; no demurrage is applied in the math.

Verify the methodology or inspect the source code in your browser's dev tools.

Where to go from here

Read next

M2 Money Supply Explained

M2 is approximately $23.2T as of July 2026, up from $1.5T in 1980.

Explore further
  • Money Supply Tiers (M0-M3)The Federal Reserve tracks money in three published tiers plus the discontinued M3.
  • M2 Money SupplyU.S. money supply grew 41% in 25 months during 2020-2022. What M2 measures, where the new dollars come from, QE vs QT, and what happens when the supply shrinks.
  • M2 vs Inflation TrackerCharts historical US M2 growth against CPI inflation with a toggleable 12-to-18 month lag marker.

Sources

Bracketed numbers and verify badges in the text link to these sources. Figures, rates and rules change: check each source’s date before acting on it.

  1. Wikipedia, Wörgl experiment overview ↩
  2. Federal Reserve Bank of St. Louis (FRED), Velocity of M2 Money Stock (M2V). Checked 2026-09-26. ↩

Calculators are educational estimates, not financial advice. Disclosures · How pages are reviewed