3 ms·

Where does the extra money come from? Out of thin air?

by refurb 3y ago

ta988 3y ago
This is exactly what GDP means... take everything multiply by price and sum.
raincole 3y ago
GDP isn't money. It's production. There is an assumption behind GDP: people generally pay production for a fair amount of money. The more untrue this assumption is, the less meaningful GDP is.
- refurb 3y ago
  I’m talking in the example ” let's pay a company X that will pay the gardeners. It'll cost 95k.” Where does that 95k come from?
  - raincole 3y ago
    For this specific example? Just like any company's 95k. They got the initial capital from investors, they sold things to customers, they got loans from a bank, etc. Or you're asking generally where money comes from? It's a good (and complicated) question. Google monetary and banking. In multiple senses, money DOES come out of thin air.
  - orwin 3y ago
    City budget or loans. Easy enough if your mayor have a friend who want to start a gardening company ! I'm joking: even without corruption, you can find an ideological reason, as a company will surely be more efficient than public servants! But more likely because of incertitude: what do we do if a gardener resign? Paying an existing company 95k/year instead of spending 75k/year directly isn't a huge expense increase, and if 20k/year is the price for peace of mind (no new equipment to buy, no HR issues...) it can very well be worth it. I'm not saying this is good or bad by the way, i'm saying this is how GDP work. It's factual. Yes, there is a left-wing slant about how i presented it, but it wasn't heavy, and a liberal could use the same example in the same way and justifying a better distribution of work and concerns (while still finding that GDP is worthless in this case) This is interesting as an indicator, it's meaningless as a target.
    - refurb 3y ago
      But borrowing that money has implications for the economy and other businesses. This is the mistake the OP made. You can't "goose" GDP by borrowing because that money has to come from somewhere. And the money used to "goose" GDP is money that doesn't go to other productive uses.
- mrguyorama 3y ago
  It's not even production because of that assumption. It's "sum of prices paid" basically

Where does the extra money come from? Out of thin air?

by refurb 3y ago

Where does the extra money come from? Out of thin air?

ta988 3y ago

This is exactly what GDP means... take everything multiply by price and sum.

raincole 3y ago

GDP isn't money. It's production. There is an assumption behind GDP: people generally pay production for a fair amount of money. The more untrue this assumption is, the less meaningful GDP is.

refurb 3y ago
I’m talking in the example ” let's pay a company X that will pay the gardeners. It'll cost 95k.” Where does that 95k come from?
- raincole 3y ago
  For this specific example? Just like any company's 95k. They got the initial capital from investors, they sold things to customers, they got loans from a bank, etc. Or you're asking generally where money comes from? It's a good (and complicated) question. Google monetary and banking. In multiple senses, money DOES come out of thin air.
- orwin 3y ago
  City budget or loans. Easy enough if your mayor have a friend who want to start a gardening company ! I'm joking: even without corruption, you can find an ideological reason, as a company will surely be more efficient than public servants! But more likely because of incertitude: what do we do if a gardener resign? Paying an existing company 95k/year instead of spending 75k/year directly isn't a huge expense increase, and if 20k/year is the price for peace of mind (no new equipment to buy, no HR issues...) it can very well be worth it. I'm not saying this is good or bad by the way, i'm saying this is how GDP work. It's factual. Yes, there is a left-wing slant about how i presented it, but it wasn't heavy, and a liberal could use the same example in the same way and justifying a better distribution of work and concerns (while still finding that GDP is worthless in this case) This is interesting as an indicator, it's meaningless as a target.
  - refurb 3y ago
    But borrowing that money has implications for the economy and other businesses. This is the mistake the OP made. You can't "goose" GDP by borrowing because that money has to come from somewhere. And the money used to "goose" GDP is money that doesn't go to other productive uses.
mrguyorama 3y ago
It's not even production because of that assumption. It's "sum of prices paid" basically