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? Every payment is a transfer from one person to another. If you spend $10 on, say, golden rocks (gold), it doesn't get eaten and wiped from existence by the G

? Every payment is a transfer from one person to another. If you spend $10 on, say, golden rocks (gold), it doesn't get eaten and wiped from existence by the God of Golden Rocks, but rather goes into the pocket of the gold miners and owners of the gold mining capital. It doesn't make a difference that gold is a commodity, not a service. Net product is equal to income. You learn this in Macroeconomics 101. Example financial statement: http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=43&FirstYear=2002&LastYear=2004&Freq=Qtr http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTa...

eru 16y ago
A side note: While Gold is chemically fairly stable, money can be created and destroyed.
- cynicalkane 16y ago
  I'm confused what this has to do with the national income and product accounts. The point of my post is that any product produced and traded falls on both sides of the product/income balance. If a gold miner decides to eat that dollar later (or sell it to the Federal Reserve) that's a monetary phenomenon. My guess is that you wanted to throw out some vaguely gold-bug sort of thing out there, and protect yourself from downvoting by marking it "side note".
  - eru 16y ago
    Please let me explain. I do not really disagree with your main points. yummyfajitas comment about only expenses on services showing up in income was probably not very well worded. I guess he's not using the economist's definition of income. If you substitute wages for `income' in his statement, it makes some sense. Also I do see that income and production have to be equal (modulo effects of moving wealth in and out of the system, perhaps). Different consumption patterns may lead to different distributions of income and wages, even if the sum stays the same. (I don't know whether `the debt fuelled boom' that was mentioned, depresses the median income while boosting the rich.) My side note was really just a side note. The central bank does create and destroy money. I am not a gold bug. If you want commodity based money, tie your currency to a basket of commodities. Even the BigMac index is better than useless gold.
    - eru 16y ago
      P.S. I only mentioned gold because you mention gold.
yummyfajitas 16y ago
I believe gjm11 was talking about personal income (i.e., wages/tips/capital gains), not total income to all entities. At least, that's usually what people talking about inequality are discussing, since that's the only thing the government keeps statistics on. So buying $10 worth of golden rocks will increase GDP by $10, and the balance sheet of Gold Inc by $10. This will only increase personal income if the owner of Gold Inc sells $10 worth of stock or receives $10 worth of dividends in the same year.
- cynicalkane 16y ago
  This could be true, but I find it more likely that the original poster simply doesn't understand what he's talking about. For example, take your thought experiment, and modify it such that Gold, Inc. pays out all $10 in compensation and dividends, and grows its balance sheet by $0. Now, we have $10 in debt-fueled spending, $10 in increased personal income, and the original poster is still wrong.
  - gjm11 16y ago
    I fail to see how your criticisms indicate that I simply don't understand what I'm talking about, though of course that's always possible. Aggregate personal income is typically roughly proportional to GDP. GDP has grown quite a bit over the last decade, which suggests that aggregate personal income has too. The population hasn't grown much over that time, which suggests that mean personal income has also grown quite a bit. (More quantitatively: US GDP growth has been something like 40% per decade recently, US population growth more like 10%, so mean income has grown by about 30% over that period.) If median income goes down and mean income goes up, that typically indicates that richer people are gaining while poorer people lose. (It doesn't have to; imagine, e.g., that everyone below the median income jumps to $1/year below the median. Result: the median stays the same while the mean goes up. This is not at all what typically happens, though.) If the growth in aggregate personal income has been slower than that in GDP, that indicates that businesses' profits are growing faster than what they pass on to their employees. That translates in the not-much-longer term to more money for the owners of the businesses. Who are, surprise surprise, on average substantially wealthier than median. So, again, more gains for the wealthy than for the not-so-wealthy; so, again, increasing inequality. What any of this has to do with the bizarre notion that when you buy gold the money gets eaten by a golden rock god, I'm not sure. (I can kinda see how you might have got the impression that yummyfajitas thinks that, but immediately after making the golden-rock-god comment it seems like you start speculating on how I probably have no clue what I'm talking about. Highly mysterious, but I'm probably just being dim.)

eru 16y ago

A side note: While Gold is chemically fairly stable, money can be created and destroyed.

cynicalkane 16y ago
I'm confused what this has to do with the national income and product accounts. The point of my post is that any product produced and traded falls on both sides of the product/income balance. If a gold miner decides to eat that dollar later (or sell it to the Federal Reserve) that's a monetary phenomenon. My guess is that you wanted to throw out some vaguely gold-bug sort of thing out there, and protect yourself from downvoting by marking it "side note".
- eru 16y ago
  Please let me explain. I do not really disagree with your main points. yummyfajitas comment about only expenses on services showing up in income was probably not very well worded. I guess he's not using the economist's definition of income. If you substitute wages for `income' in his statement, it makes some sense. Also I do see that income and production have to be equal (modulo effects of moving wealth in and out of the system, perhaps). Different consumption patterns may lead to different distributions of income and wages, even if the sum stays the same. (I don't know whether `the debt fuelled boom' that was mentioned, depresses the median income while boosting the rich.) My side note was really just a side note. The central bank does create and destroy money. I am not a gold bug. If you want commodity based money, tie your currency to a basket of commodities. Even the BigMac index is better than useless gold.
  - eru 16y ago
    P.S. I only mentioned gold because you mention gold.

yummyfajitas 16y ago

I believe gjm11 was talking about personal income (i.e., wages/tips/capital gains), not total income to all entities. At least, that's usually what people talking about inequality are discussing, since that's the only thing the government keeps statistics on. So buying $10 worth of golden rocks will increase GDP by $10, and the balance sheet of Gold Inc by $10. This will only increase personal income if the owner of Gold Inc sells $10 worth of stock or receives $10 worth of dividends in the same year.

cynicalkane 16y ago
This could be true, but I find it more likely that the original poster simply doesn't understand what he's talking about. For example, take your thought experiment, and modify it such that Gold, Inc. pays out all $10 in compensation and dividends, and grows its balance sheet by $0. Now, we have $10 in debt-fueled spending, $10 in increased personal income, and the original poster is still wrong.
- gjm11 16y ago
  I fail to see how your criticisms indicate that I simply don't understand what I'm talking about, though of course that's always possible. Aggregate personal income is typically roughly proportional to GDP. GDP has grown quite a bit over the last decade, which suggests that aggregate personal income has too. The population hasn't grown much over that time, which suggests that mean personal income has also grown quite a bit. (More quantitatively: US GDP growth has been something like 40% per decade recently, US population growth more like 10%, so mean income has grown by about 30% over that period.) If median income goes down and mean income goes up, that typically indicates that richer people are gaining while poorer people lose. (It doesn't have to; imagine, e.g., that everyone below the median income jumps to $1/year below the median. Result: the median stays the same while the mean goes up. This is not at all what typically happens, though.) If the growth in aggregate personal income has been slower than that in GDP, that indicates that businesses' profits are growing faster than what they pass on to their employees. That translates in the not-much-longer term to more money for the owners of the businesses. Who are, surprise surprise, on average substantially wealthier than median. So, again, more gains for the wealthy than for the not-so-wealthy; so, again, increasing inequality. What any of this has to do with the bizarre notion that when you buy gold the money gets eaten by a golden rock god, I'm not sure. (I can kinda see how you might have got the impression that yummyfajitas thinks that, but immediately after making the golden-rock-god comment it seems like you start speculating on how I probably have no clue what I'm talking about. Highly mysterious, but I'm probably just being dim.)