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A comment on The euro has tumbled near parity to the US dollar. Parent comment

Re:The euro has tumbled near parity to the US dollar by JumpCrisscross on Monday July 11, 2022 @07:56PM (#32063809)
> Intuition says that it should. So I think that’s what GP is trying to understand.

Velocity [1].

Ignoring it is like sticking a water wheel in the ocean and asking why it doesn’t turn given the depth. Quantity doesn’t turn it. Flow does. And that depends on more than how much water is present.

[1] https://en.m.wikipedia.org/wiki/Velocity_of_money

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Re:The euro has tumbled near parity to the US dollar by panarky on Monday July 11, 2022 @08:50PM (#32064218)
Haven't heard the water wheel in the ocean analogy, and I love it! Thank you!

There's a very simple mathematical identity: MV=PQ

M is money supply, V is velocity, P is price level, and Q is all goods and services.

So if the economy produces the same amount of stuff (Q is constant) and if V falls in the inverse ratio as the increase in M, then the price level will not change.

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