Economics by Bluey: Velocity of Money
Origin Story
Bluey is a kids’ show from Australia’s equivalent of PBS. The cartoon features a family of Australian cattle dogs (commonly called “blue heelers”).
Bluey is a phenomenon in our household. Its eight-minute episodes warm the heart, induce cute giggles, and, most importantly for me as a parent, keep my wonderful daughters entertained long enough for me to apply for a job or five.
This particular episode did more than that. It caused an outburst, by yours truly.
“That’s economics. This entire episode is about the velocity of money!”
My husband, one daughter, and our two dogs looked at me, annoyed at the interruption. My second daughter wasn’t fazed. She was engrossed. Bluey does that, for adults and kids alike.
Plot Summary: Bluey, Series 1, Episode 20 - “Markets”
Bluey gets five “dollar-bucks” from the Tooth Fairy. The bill even has an official Tooth Fairy sticker! (Aside: Yes, the term “dollar bucks” is what they call their currency in Bluey-land.)
She heads to the farmers market with her dad and sister, Bingo. Her dad asks what she wants to buy, but Bluey isn’t sure. There are so many stalls!
She meets her friend Indy (an Afghan Hound), and they decide to explore the market together. Indy’s mom runs a stall selling organic, sugar-free cakes.
As they explore, Bluey realizes she wants to buy something both she and Indy can enjoy together. This proves to be a challenge. Indy has a more “granola” upbringing, which limits her options. The episode playfully explores this contrast while showcasing Bluey’s empathy.
One of my favorite moments happens at a stand selling poffertjes, a sweet Dutch pastry.
Indy: Does that have wheat, sugar, gluten, or dairy in it?
Shopkeeper: That’s all it has in it.
What happens: Check out this two-minute video to not only see the climax of the episode, but also a fantastic illustration of velocity of money as we follow Bluey’s 5 dollar-bucks through the market.
That last vendor? Indy’s mom. She gives Indy the five dollar-bucks and asks her to tip the street performer.
Indy gasps in amazement. It’s Bluey’s Tooth Fairy money, official sticker and all!
The episode ends with everyone joyfully dancing. Bluey may not have made the perfect purchase, but her $5 still found its way to the right place: spreading joy, connection, and a catchy tune in the process.
Economics: The Velocity of Money
The velocity of money is a measure of rate at which people spend their money. (Notes 1) More formally: it is a measure of how often money is used to buy goods and services in an economy during a certain period. A higher velocity of money generally signals a more active economy because money is changing hands quickly,
What this means: An economist would tell you that Bluey’s $5 from the tooth fairy had an extremely high "velocity". It circulated quickly through the market. Several economic actors (in this case cartoon dogs) received the tooth fairy money as income and then immediately purchased something they wanted or needed. In high-velocity markets, money flows freely — people spend, people earn and, in a reasonably free and safe market, the cycle is virtuous. (Note 1)
In real life, this looks like having a regular job with good wages and treating yourself to a coffee, a massage, or maybe buying some surprise poffertjes at the local farmer’s market for someone you love. High-velocity markets are built on trust — the belief that "what goes around comes around." When people spend money, they do so with confidence that income will follow. High velocity markets are beneficial because when one person spends money - it’s income for someone else. To a point, the higher the velocity of money, the richer and more prosperous we all are.
Let’s contrast that with a low-velocity market. Imagine if the toffee apple vendor took Bluey’s $5 and stuffed it into a fanny pack, never to spend it. Economic activity stops there. The virtuous cycle stops because no one else earns income.
The practical takeaway: This is why market psychology matters.
Markets with high-velocity are like gardens. They grow and thrive in an environment of confidence, trust, and security.
Markets with low-velocity are a wasteland of fear and distrust. People hoard money, withdrawing it from circulation.
John Maynard Keynes and Velocity of Money
Another key driver of high-velocity markets is wealth distribution, a concept emphasized by economist John Maynard Keynes. Keynes was prolific, but on the topic of velocity of money, Keyne’s work was focused on the high impact of government programs help lower-wage workers. When lower wage workers have stable, livable incomes, the velocity of money increases .
Why? Keynes observed that wealthy people tend to save more, while individuals lower-income individuals spend more of what they earn. For some, this finding is counterintuitive, but Keyne’s found it was the folks with less who keep money moving in a way that benefits everyone (Notes 2) .
Here’s an example using simple numbers.
Twenty low-wage workers earn $50 a week. They each spend $45 and save $5.
Total income: $1000
Total spending: $900
One high-wage worker earns $1,000 a week and spends $200, saving $800.
Total income: $1000
Total spending: $200
Same total income, same amount of money but radically different spending. The group with lower income generates more economic activity because a greater share of their income flows back into the market, creating income for others.
Now imagine you’re the chief economist trying to pull this mini-market out of a depression. Let’s assume Congress has given you a budget of $100 a week. You can either:
Option 1: Give low-wage workers a $5/week subsidy
Option 2: Or give high-income earners a $100/week subsidy
An economist with the objective of ending a depression would ask questions like: Which option puts more fuel into the economy? Which builds more consumer confidence? Which fosters more trust?
For Keyne’s there was one right answer: Option A. Both groups would likely follow their same general patterns of spending and saving. Subsidizing low wage workers, who would likely spend more of the subsidy, reinforces that virtuous cycle we saw in Bluey.
History: Keynes, The Great Depression, and the New Deal
This example illustrates how Keynes’ ideas helped pull the U.S. out of the Great Depression in the 1930s. He believed that government spending could revive the economy, but advised that the spending should be directed to low wage workers (Notes 4).
That’s why so many New Deal programs were directed at the unemployed and the poor.
The poor were suffering the most, but they were also the key to recovery. When the working class had jobs and paychecks, they spent. And that increased the velocity of money (Notes 5).
Why Velocity of Money Matters Today
Bluey helps us understand three major factors that affect velocity of money in today’s economy and why they matter:
Trust
The Conference Board’s Consumer Confidence Index is a bellwether for market trust. Will consumers spend or save? Will they circulate their dollar-bucks or stuff them into their fanny packs?Unemployment
The Bureau of Labor Statistics tracks U.S. unemployment monthly. Bluey’s story starts with income from the tooth fair. Unemployment is a measure many people the Tooth Fairy just never shows up for. Without income, there’s no spending. So the more folks in the market that are unemployed, the slower the velocity of money.Wealth Inequality
The Federal Reserve’s Distributional Financial Accounts have tracked wealth inequality since 1989. As Keynes predicted, when more money is captured and saved by the already-rich, less gets spent. That slows the whole system.
Conclusion
Bluey’s “Markets” episode is a short, brilliant illustration of how economic activity can benefit everyone. Markets with high velocity bring us together. They grow when we foster trust, empathy, and connection. I hope this explainer, with a lot of help from Bluey, shines some light on why that matters today.
Enjoyed the read? Support the next one with a cup of coffee.
Notes
Unfortunately Squarespace does not have a great footnote capability. If you have experiencing working around this, I’d love to hear from you. I try to focus on flow in the blog and keep citations and assumptions here.
(1) It’s important explain a little more about what “reasonably free” and “reasonably safe” means.
Reasonably Free: You might have noticed there is no tax charged when the $5 is exchanging hands. isn’t subject to taxes nor is the dog mafia charging a “protection fee” to run the stalls. Making taxes, in all forms less of a burden to small businesses, is important to velocity of money. Hidden from the episode is a tax somewhere (perhaps in the form of a fee for setting up a stall) that keeps purchases reasonably free.
Reasonably Safe: You also might have noticed there are no police dogs (the German shepherds are running the German sausage stand.) Keeping markets free usually means some type rules that everyone follows. Otherwise raider dogs could invade the market and rob all the stalls of cash and goods. This would only happen once, maybe twice before the stall vendors would not show up: market collapse. Protecting stall owners from crime is and ensuring transactions can happen without fraudulent activity is what I mean by “reasonably safe”. This is a vital assumption to the velocity of money.
(2) Two works by Keynes explains on behavior of high-income and low income earners.
Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. London: Macmillan.
In Chapter 8, Keynes discusses the "propensity to consume" and the observation that lower-income individuals tend to spend a larger proportion of their income, contributing more to economic activity.
In Chapter 10: Keynes explains how saving rates vary by income and how this affects aggregate demand. Wealthier individuals are more likely to save, reducing overall consumption unless offset by other spending.
(3) Citation: Skidelsky, R. (2009). Keynes: The Return of the Master. New York: PublicAffairs.
While Keynes was British, his theories inspired Roosevelt-era New Deal programs, especially after the publication of The General Theory in 1936.
(4) Citation: Keynes, J. M. (1933). The Means to Prosperity.
In this essay, Keynes advocates for government-financed public works as a way to reduce unemployment and stimulate spending, particularly among those with a high marginal propensity to consume.
(5) Citation: Galbraith, J. K. (1954). The Great Crash, 1929. Houghton Mifflin.
Galbraith echoes Keynesian insight that recovery depends on boosting demand from the bottom up, where consumption is most likely.