“A medium of exchange needs to circulate to be useful.”
— Charles Eisenstein in Sacred Economics.
Money needs to move around in order to be valuable. Money is not actually very useful while it’s sitting in the bank. What does it mean to move money around? Money circulates when we get paid; we move it when we spend it on rent and food; we move it when we pay our utilities bills; and it moves again when the utility company pays their employees. How often we move it in a certain time period is called “the velocity of money.” Bet you didn’t know that money has a speed. Pretty cool huh?
When we move money inside our cities and neighborhoods, it creates even more value for our cities and neighborhoods. When you buy a meal at an independent restaurant owned by someone in town who buys from the farms and producers nearby, your money keeps moving quickly inside your community. Money paid for that meal will probably move several times over in your community before it heads out of town (if it ever does). It moves when the waitress from the restaurant buys a latte down the street and the farmer builds a new fence with local labor. It moves when the restaurant owner pays the local day care and the dishwasher buys a beer.
Next time you spend some money, think about who gets that money. Imagine where it might go next. When you pay the dentist, what happens to the money next? And after that? If you buy some flowers on the way home from work, who got that money? What are they going to do with it? Does it move fast? Or sit somewhere for a long time?
Try this out today. See how far you can think about money moving through your local economy. Now here’s the intriguing question I’ll leave you with: does your money ever make its way back to you?