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> Economies are improved and sustained by moving money, not by stagnant money. A common misconception. The health of an economy lies in the goods that are exch

> Economies are improved and sustained by moving money, not by stagnant money. A common misconception. The health of an economy lies in the goods that are exchanged; money is merely a placeholder. They are improved by producing more goods than are consumed, which creates room for investment in capital goods (tools for enhancing the productivity of goods and labor) and the research and development of improved technology (learning to make better tools). "Stagnant" money just means that more goods were produced than were consumed, and the surplus was not actively invested. The surplus still exists, and continues to fuel investment (by others) so long as the money remains unspent. The "stagnant" money is off the market, not competing for goods and services, and as such contributes to a reduction in prices similar to what would occur if that money were simply destroyed (albeit temporarily), shrinking the money supply. In effect this leaves the decision about how the surplus of goods should be invested up to other market participants. If the owner of the "stagnant" money knows of ways to invest which would provide an ROI better than the average rate of return on the market (i.e. the rate of deflation) then they should do so, earning themselves a profit and raising the average rate of return. However, below-average investments—malinvestments—would lower the average rate of return and reduce overall economic growth, and ought to be discouraged. It's better for everyone for the owner to simply sit back, "hoard" the money, and receive a passive reward for producing more than they consumed than it would be for them to actively invest in ventures with below-average realized returns and thus divert resources from better-performing ventures, but that is exactly what an actively inflationary monetary policy encourages by driving people who lack the competency to choose good investments to invest in the market anyway merely to avoid losses due to money supply inflation.

Jtsummers 6y ago
It would've been better if I'd been more deliberate with that sentence, you're right. "money" was my shorthand for "things moving in the economy, including financial measures like cash and the exchange of goods and services". Just measuring the movement of money means that two people could create an apparently vibrant economy by exchanging $1,000 between them every minute of every day, but such an economy would be absolutely bereft of any real value or health. "Stagnant" was my way of referring to hoarded money that's not actually invested in anything. Yes, it's equivalent to removing it from the economy and it reduces the nominal price of goods and services, which also means it reduces the nominal wages (over time). Which means old money is given a much stronger benefit in the economy when they finally spend it, and new money (including new entrants like an 18 year old getting their first full time job) are severely penalized not due to any actual lack of skill or ability, but due to their entering the economy 100 years too late.

Jtsummers 6y ago

It would've been better if I'd been more deliberate with that sentence, you're right. "money" was my shorthand for "things moving in the economy, including financial measures like cash and the exchange of goods and services". Just measuring the movement of money means that two people could create an apparently vibrant economy by exchanging $1,000 between them every minute of every day, but such an economy would be absolutely bereft of any real value or health. "Stagnant" was my way of referring to hoarded money that's not actually invested in anything. Yes, it's equivalent to removing it from the economy and it reduces the nominal price of goods and services, which also means it reduces the nominal wages (over time). Which means old money is given a much stronger benefit in the economy when they finally spend it, and new money (including new entrants like an 18 year old getting their first full time job) are severely penalized not due to any actual lack of skill or ability, but due to their entering the economy 100 years too late.