On Nov 18, 2006, at 11:35 PM, boddi satva wrote:
> On 11/18/06, Doug Henwood <dhenwood at 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