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Money that stops circulating has a tangible market impact, especially billions of dollars tied up in corporate treasure chests. Stalled money slows the velocity
by zanny 10y ago
Money that stops circulating has a tangible market impact, especially billions of dollars tied up in corporate treasure chests. Stalled money slows the velocity of the economy and effectively shrinks the monetary base. One of the hallmarks of post gold-standard fiat economic planning is to push monetary velocity as high as it can manage through many means because you get more market growth the faster money changes hands and circulates.
IE, the capital market could get richer, or it could get faster, and in either case absolute money moved increases. The former is often hard to do, since you either need to print money without causing inflation or cause the money to appreciate against goods into a strong dollar, and both have negative side effects going faster doesn't really have until you are going too fast and realize you have to slow down.
- skybrian 10y agoNot buying it. Removing money from circulation and adding money to circulation should cancel out. Also, that's not really what happens when a corporation has a lot of cash because it's not really cash. The money is still invested, but in safe investments like government bonds. The cash is then still circulating.