[lbo-talk] financial exchanges proportion ?

[Mike Beggs]

On Wed, Feb 11, 2009 at 5:00 AM, SA <s11131978 at gmail.com> wrote:
> Jordan Hayes wrote:
>
>>>> Where did I read that financial exchanges volumes were
>>>> 10 times (or something similar) more important than
>>>> goods/services exchanges ?
>>>
>>> [...] 2007 average daily turnover in the global foreign
>>> exchange market at $3.2 trillion, which on an annual basis
>>> would I guess be something on the order of 50 times global GDP.
>>
>> So ... "more" == "more important" ...?
>
> No, I almost added that these comparisons don't mean anything. Reminds me of
> when people gasp at the statistic that Wal-Mart's annual sales equal x% of
> GDP, even though this involves massive double-counting, since gross sales
> are not a component of GDP.

Yeah this comparison bugs me too; it involves some kind of category
mistake, since GDP quantifies incomes from production and financial
market turnover quantifies transactions in assets. Since both kinds of
transactions use money, though, there are some interesting issues,
though not what normally seems to be the implication (that 'these days
the economy is all about finance rather than production' or that
'finance takes space from productive activity'). I seem to remember a
BIS article from the last few years looking at the implications for
the quantity theory of the explosion in financial transactions - the
upshot being that velocity (or demand for money) is even more variable
and links between monetary quantities and money-income even more
tenuous than they used to be.

Cheers,
Mike Beggs