Re: Money Supply, Credit Supply

From: jpathogan (jpathogan_at_comcast.net)
Date: 06/11/04 

Date: Fri, 11 Jun 2004 05:19:30 GMT

"Operator" <savantgraves@hotmail.com> wrote in message
news:FVHxc.716511$oR5.256813@pd7tw3no...
> I'd agree with Andy on this one. Think about it for a moment - let's say
> that we had the total GDP of the world in currency. Frankly, that's a lot
> of currency - probably more than anyone could feasibly manage. However,
the
> pernient question is whether or not we reqiure all that currency to
> function - the answer is relatively straightforward. No.
>
> The classical reasoning is as follows - currency is only valuable as a
means
> by which to either store value or facilitate trade. Since currency is
not,
> in and of itself, worth anything, the amount of currency that should be
> produced is only as much as is needed to facilitate trade. Thus, you only
> need enough to cover the "gap" between buyers and sellers, and only for a
> short time.
>
> Thus, if M is the supply of money, V is rate of circulation from buyer to
> seller, P is the price level of the economy and S is the output of goods
and
> services -
>
> M = (P*S)/V
>
> Thus, the supply of money only needs to be a fraction of the total output
of
> the nation.

In the first place, money (or currency) isn't a commodity; it is the unit
by which other economic values are judged.

The relevant part of the US Constitution which relates to this matter says:
"Congress shall have power to...coin money, regulate the value thereof, and
of foreign coin, and to fix the standards for weights and measures."

(The next paragraph deals with counterfeiting.)

So the founders clearly meant for the US Congress to have the sole power to
create money in the name of the US, and that it is intended to be such a
standard for the measurement of other economic values, or so it seems to me.

Let's say that the GDP of the entire world was represented by currency. (By
"currency" I do not necessarily mean the actual printing of bills; it could
just as easily be done by a few keystrokes on a computer.) It's already
represented by something, right? Or it wouldn't even register on the GDP
scale, since there is no bartering in the world's economy. So it must, even
by default, be represented by some sort of currency.

My complaint against the present system is that additional "money" is
borrowed into existence, and that entails the payment of interest, which to
my way of thinking, is not necessary at all. In fact, it represents a large
and growing debt to which we, as citizens, should not be subjected to.

>

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