"Anyone else have a better explanation?"
I was thinking the speed at which money multiplies.
As a crude example. If you borrow a million dollars from a bank, you won't take that money out immediately. You usually have an account at the bank with a credit of the million dollars you just deposited. Since the money is not withdrawn at once, the bank can reloan a percentage of the balance, say it lends, 500,000 of it. The 500,000 just lent is either redeposited at the same branch or another branch, etc. A percenatge of this latter 1/2 million dollar is eventually loaned again. And the process continues.
The velocity of money has to do with the speed at which the original million dollars is relent over and over, or, IOW, the time it takes for the money to multiply at its maximum.
There is a maximun to which an original dollar will multiply to, if I'm not mistaken, due to reserve requirements and other factors.
Please correct me on this because I'm not sure I know what I'm talking about. Only trying to recallect what I learned ages ago. :)
* The velocity of money is the speed at which money circulates: the average number of times each dollar is spent on final goods and services in a year. If MV=PQ, then V = PQ/M Example:
* If M = $1.6 trillion, Q = $6,4 trillion, and P = 2, then V = 8, so that a dollar must be spent an average of 8 times per year if a $1.6 tr. money supply is to support an output of $6.4 tr.