Subject:
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Re: All The Money In The World
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Newsgroups:
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lugnet.off-topic.fun
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Date:
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Thu, 21 Dec 2000 18:10:19 GMT
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Viewed:
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180 times
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In lugnet.off-topic.fun, Dave Schuler writes:
> In lugnet.off-topic.fun, Jude Beaudin writes:
>
> > Assuming your money is part of the total $1000 the economy never would • increase
> > because you give $10.50 to the post office. The post office increases it's
> > portion of the $1000 dollars by $10.50 at the same time you lose $10.50 of • your
> > portion. Then when the AFOL gets the money order, his portion of the $1000
> > increases by $10.00 the same time the post office's portion decreases by
> > $10.00. Thus at any given time the total money will always equal $1000. The
> > only way to change the value of the community is to add or remove money.
>
> Does that include the time between the purchase of the money order and its
> cashing? During that time it seems that there is $10 more in
> circulation--not actual, minted coinage, but legal tender nonetheless.
Isn't this an illustration of the money multiplier effect? The most liquid
instruments, M1, which include cash, checks, money orders, etc., have the
highest "multiplier" because they circulate faster, increasing the value of
money in the economy (as you have illustrated) to a greater extent than the
less liquid instruments which comprise M2, M3, etc. So there really is more
money in circulation, and time IS a factor. I believe these effects are all
taken into consideraton in the Fed's actions in controlling the money
supply and tweaking our economy. (Pardon me if I don't have the gory details
correct, but its been many years since I took my last econ course!)
Maggie C.
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Message is in Reply To:
 | | Re: All The Money In The World
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| (...) Does that include the time between the purchase of the money order and its cashing? During that time it seems that there is $10 more in circulation--not actual, minted coinage, but legal tender nonetheless. Dave! Still talking to himself. (24 years ago, 21-Dec-00, to lugnet.off-topic.fun)
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