Re: Uncle Miltie, he dead
On Nov 18, 2006, at 11:35 PM, boddi satva wrote:
On 11/18/06, Doug Henwood dhenwood@panix.com wrote: >
On Nov 18, 2006, at 6:20 PM, boddi satva wrote:
And what do we mean by “GDP” when so much of our stuff is produced overseas?
That appears as imports, a subtraction from GDP.
And the stuff that the foregn workers buy with their wages?
Depends on the origin of the goods.
The point is that every economic metric is an estimate. And money is the least definable of all the metrics. Every day people accept payment on different terms.
Sure GDP is an estimate, limited by definition and measurement
problems. But it’s one measure that’s consistent over time that
correlates well with other real-world economic variables (industrial
production, employment, even public attitudes). But the monetary
aggregates all tell completely different stories.
Yes, but don’t ever underestimate the capacity of the credit system to pump out loans, even in the old days. You think the Dutch bought tulip bulbs with real money?
Well, first of all, what is “real money? What are you - a goldbug now?
In this context, “real money” = money earned in production (wages or
profits - yeah, I know I’m being momentarily bourgeois in describing
profit as earned income). That’s different from credit money, which
is created by thin air. I could sell you a tulip bulb on the promise
that you’ll pay tomorrow, because you think you’ll be able to sell it
at a profit. You don’t even need a banker to create credit, though of
course it helps.
You can hardly compare the credit instruments of the 1600s Holland to modern America. Seriously, Doug.
Don’t disparage the ingenuity of those old Dutch! They were trading
options and futures in Amsterdam 400 years ago.
That’s a distributional issue, not an issue of the aggregate quantity of money.
A “distributional issue” - well, isn’t increasing the money supply about increasing the probability that it will be distributed?
Nothing changes if the distributions remain proportional; a pure
monetary injection could just raise the price level. Tight money can
create unemployment and recessions, which have distributional
effects, but loose money doesn’t necessarily change anything.
Doug