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> the economy is powered by money changing hands The economy is powered by creation and exchange of value. Money changing hands is mistaking the incentive for
by cynicalkane 8y ago
> the economy is powered by money changing hands
The economy is powered by creation and exchange of value. Money changing hands is mistaking the incentive for the act itself.
Most economic schools of thought advocate stimulus during recessions to stop a slowdown of money changing hands, but this is a short-term measure. Money isn't the economy and there's no reason to believe making money fly around willy-nilly will help the economy in a permanent way.
- dunpeal 8y agoExactly. The key factor in growth is the production of goods an services. To easily demonstrate: imagine everyone stopped producing goods and services tomorrow in the US. Everyone would still have the exact same amount of money, but you will not be able to use it to buy a fresh loaf of bread (since none are being baked) or have your car serviced. The value of money will drop to zero. It won't matter at all if it changes hands; indeed, it won't, since there won't be anything to buy. Thinking "money changing hands" powers the economy is thus mistaking effect for a cause.
- nybble41 8y ago> Money changing hands is mistaking the incentive for the act itself. I think there's more to it than that. There is no particular reason to think that money changing hands benefits the economy, or society, but there is at least one party that does benefit: the government. Every time money changes hands the government takes a share in the form of income and/or sales taxes. Ergo, there is reason for the idea that higher monetary velocity is better to be popular among both politicians and the economists who advise them.