Re: Money Supply, Credit Supply

From: jpathogan (jpathogan_at_comcast.net)
Date: 06/13/04 

Date: Sun, 13 Jun 2004 04:33:33 GMT

"Grinch" <oldnasty@mindspring.com> wrote in message
news:67fkc01oief5mhsvv8au78fovakk2j8a2d@4ax.com...
> On Fri, 11 Jun 2004 05:19:30 GMT, "jpathogan" <jpathogan@comcast.net>
> wrote:
>
> >Let's say that the GDP of the entire world was represented by currency.
>
> GDP is a flow. Currency is a stock. Which makes this incoherent.

I think I explained the miswording in a reply to Andy's post. GDP is an
output, not a flow. "Currency", as it is done today, is actually credit.
Credit is debt, so what is actually floating around the world is tons and
tons of debt.

If there were real money in circulation, then it couldn't disappear (unless
in the horrible circumstance of the dissolution of the state which issued
it.)

>
> $1 of currency can be passed in a year through 100 transactions to
> add $100 to GDP, or 1,000 transactions for $1,000, or whatever.
>
> So how much currency would you need to "represent" $X of GDP.

Impossible to state, for as you say, the money turns over multiple times
over the course of time. What is not impossible to say is that, once
created, a dollar (or other unit of currency) under a "money" (as opposed to
a "credit") regime would hold it's value, provided that the unit was issued
in proportion to the value accrued by the issuing nation.

>
> Give us the formular and explanation for it.

Well, basically, the amount of money in existence should be equal to the
value of the nation that issued it. That would include the infrastructure
of the nation, the manufacturing capacity of the nation, the agricultural
capacity of the nation, et cetera. In other words the productive capacity
of the issuing nation, plus its land value.

That's the best I can do off the top of my head.

>
> How do you get a stock to represent a flow?
>
> >... ( It's already represented by something, right?
>
> Is it? Just what have you got in mind there?

>
> > 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.
>
> ????
>

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