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.
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.
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 verify×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 ↗Lietaer documented the experiment in The Future of Money; mainstream economic history confirms the basic facts..
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.
Educational tool. Illustrates the equation of exchange MV=PT in a simplified form.