Evening star., 1933-05-28
The Velocity of Money Circulation
BY FREDERIC ]. HASKIN.

Since money has taken so prominent
a part in the problems Of Congress and
the administration, there has been a
good deal of speculation among fnan-
cial experts at Washington as to the
velocity of money circulation. In other
words, how rapidly does money clrcu-
late and how many times does given
piece Of money change hands; how
many debts does it pay?
The practice of boarding has given
added Importance to the question. 1t
has been claimed that large part OF
the economic distress has been due to
the fact that the circulation OF money
has been halted by its secretion in safe
deposit boxes, under mattresses, or IN
the proverbial sock. On large scale,
it Is known how money is used in any
thing like normal times. This can be
ascertained from study of the bank
clearings It is shown that clearing
house banks have clearings Of about
$4,000 100000 a week. There is only
$4,000 600, 900 or thereabouts of money
of all kinds in the United States. These
clearing figures, then, indicate that all
the money changes hands about 81
times year.
However, these clearing figures relate
only to checks and do not include cash
at all If $4,000. GOO. 900 in checks is
cleared in each week through the banks,
it is obvious that $500, ,000, ,000, 900 Of in
debtedness Is paid of in the course of
year. This Is more money than there
is in the world 1t is more than the
total cost Of the World War to all ma
tions. 1t Is over half trillion dollars.
Treasury experts have been interested
in a more intimate study which recently
has come to their attention. 1t arose
from an experiment made by the Mill
waukee Chamber of Commerce. AS a
feature of a convention held in the
Wisconsin city. the chamber put in
circulation $400 in money SO marked
that 1t could be traced. The tracing
could be carried on Indefinitely until the
money actually wore out or returned to
the Treasury or to Federal Reserve
Banks for redemption and destruction
But in the short time that the chamber
traced the rnoney-a matter OF lew
days only-it was found that the s400
paid bills amounting to $1,425. That
much Indebtedness was discharged by
the original s400.
While a certain amount OF cooper
alton from local people was required to
keep track of the use of the money, nc
collusion was involved and, in all prob
ability, many transactions were missed
entirely; that is, probably more debts
were paid than could be traced.
Where the Money Went.
In detail, the fascinating story is as
follows: Three hundred dollars OF the
money paid salaries to various persons
Meals-dinners, 1uncheons-accounteo
for s258. Landlords received $136 ol
the S400, while S109 was expended foi
groceries. The sum of $78 was spent foi
general merchandise, while hotel bills
to the extent of only $48 were paid. Ir
view of the fact that convention was
in the city at the time the experiment
was conducted, it appears that compar-
atively little of the original S400 got into
the hands of the visitors as hotel bills
doubtless constituted major portion
Of their expenses. Home town people
were getting the chief use of the funds
Banks received $38 of the identifl.
able money on deposit, while board bills
were paid with $35. Filling station mer
received a respectable share, for s3s
came into their hands in payment fol-
gasoline and oil. Housewives paid s34
of the money for meats, while coal ano
other fuel bills we're paid to the extent
of S31. Twenty-nine dollars went into
the hands of public utility companies