Report The Money Illusion in House prices and the economy Posted August 4, 2010 More data: money multipliers (velocity) Note that US M2 historically has velocity=8. Gilts have about the same. Above US M2 sits another tower of lending facilitated by circulation of M2/M1/M0, and I think you'll find another tower of lending (what is left of that portion of the shadow banking system run out of the UK) sits atop the circulation of gilts. Is the key to this argument explaining why velocity is equal to fractional reserve effect or money multiplier? I have not understood why you think they are the same?