Richy_T
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January 13, 2014, 07:25:00 AM

velocity of money (number of times each unit turns over on average during the period in question)
Doesn't this equation assume that all payments are made by exchanging the actual currency (banknotes in the case of dollars, blockchain transaction for BTC)?

How does one define V when most dollar payments are made by moving numbers from one bank ledger to another?  Wouldn't the same issue arise with BTC?

(Sorry for the stupid question, but when BTC are traded at an exchange, is each transaction immediately realized on the blockchain, or are transactions tracked in internal accounts, to be combined and realized at a later time?)

V can be read from the blockchain.

Er, sorry again, what is V now for bitcoins? How is it expected to change as PQ increases?

It's important to remember that money is just tokens as a claim on resources. Though it is more rightly viewed as just a commodity.

Either way, the map is not the territory. It's very easy with economics to view one small part of economic activity and generalize it the the whole when that simply doesn't work well. Money doesn't just go from A to B, it has meaning and what goes from B to A and what A does with it is much more important. This is why government can't just spend a bunch of money and magic us out of a recession.