What is SUPPOSED to happen according to economic theory is that as quantity of money creation decreases (halvings), velocity of money (transactions) is supposed to go up to compensate, maintaining the balance of MV=PQ. This clearly cannot happen if scaling is slower than halvings.
Somebody please tell me the error of my thinking, or a slow liquidation becomes a serious consideration.
1) They don't effect the velocity (v). They effect the quantity (M). So because MV=PQ, a decrease in M MUST be compensated by a proportional increase in V in order for the equation to balance out. If it doesn't, then either price or quantity (or both) on the other side must adjust.
ok. I see where you're going wrong.
The equation of exchange is a real identity. So you can actually put anything you like in for those variables, but when you do, you get a certain interpretation of the rest.
In your first reference to it above, you used the money supply creation rate instead of the money supply. As a result, you're looking at a strange definition of 'velocity'. Yours is something like 'average number of transactions per CREATED money unit per unit time' - that's just plain weird.
In the second reference you made above, you used a more normal M which gives a meaningful 'velocity' to discuss. But in this reference, you've continued the wrong idea about M from the first reference. There's no decrease in M as a result of halvings.
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