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Circulation

Circulation is the movement of units of currency from one user to another, from that user to another, and so on.  Thomas Greco has said, “The circulatory system is a good metaphor for the financial and monetary system…blood carries nutrients to all parts of the body and the purpose of the monetary system is to carry value to where it’s needed.”

Circulation is a critical factor in the health of a currency system typically assessed by its velocity.

When money is not circulating, and it is not being saved by a user for later consumption (also see hoarding), this is called “pooling”.  A currency can gather, at a particular location (a popular business, government agency etc.) at a rate higher than that user’s capacity to respend the currency, causing an unintended barrier to effective circulation.  Too much pooling can therefore cause a currency system to collapse.

Secondly , the “currency in circulation“ is the sum of all notes, coins and demand deposits available to be exchanged for goods and services in the economy. The currency in circulation is one of the most liquid measurements of the money supply.

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