The quick answer is that an increase in the Velocity of Money devalues the dollar, that it is an inflationary force.

Here is the long answer, an excerpt from my book:

The Velocity of Money

Next consider the alternative case where 10 years later the population of both villagers and chickens doubles, (i.e., the egg to village ratio remained constant), but there are still just 1,000 gold pieces — no change to the money supply — which means that the money supply per capita is reduced by one half. Now what happens?

Assuming once again that all forces are strangely constant, that the net wealth of the society also doubled, and that the villagers are making the same daily transfers of wealth (i.e., buying the same goods and services every day), it stands to reason that twice as much wealth must exchange hands each day as compared to a decade ago.

This implies that either:

- Each coin is used twice as often per day, implying that they store the same amount of wealth as before. Each coin still buys 12 eggs.

- Each coin is used at the same rate, implying that they store twice the wealth. Each coin now buys 24 eggs.

- Or something in between.

How often a unit of currency is used per day is known as the “velocity of money,” another economic term you should throw around at uppity cocktail parties. In the first case the velocity of money doubled, and the value of the currency remained the same. In the second case the velocity of money remained constant, and the value of the currency doubled — leading to the conclusion that as the velocity of money increases, the value of the currency decreases.

If the velocity of money increases and if all the other forces are strangely constant, then the value of the dollar will decrease, and vice-versa.

Historically the velocity of money tends to decrease during economic downturns, thus a strengthening influence on the dollar during recessions and depressions.