Money does not really create money. Money creates economic activities which
support the creation of more money. Money is not a commodity. It is an agent
of exchange with purchasing power and a storer of value. But these
characteristics of money are not intrinsic and they exist only under certain
conditions. Paul Davidson points out frequently on this list that money is
desirable because and only because it possesses the highest degree of
liquidity.
If money (such as a particular currency) loses liquidity, its value falls.
Another characteristic of money that is interesting but seldom directly
discussed is that if all market participants have equal amounts of money,
money
tends to lose its liquidity or usefulness. There was a time in the 1960s,
when
the Chinese economy had perfect equality of income, one of the result was that
there was no market because money essentially lost its purchasing power.
No one
needed more money and economic activities stagnated. On the other hand,
if all
the money in an economy belongs to one person. money also loses its
liquidity by
definition. Thus income disparity is simulative up to a certain extend, after
which either to much or too little disparity will contract the market.
Henry C.K. Liu
Lissette Wendy Moreno Villanueva wrote:
> Money creates money. Maybe it is not necessary to have a "big dad"
> government creating employments just because, but an STRONG government with
> an strong financial structure to generate good macroeconomic perspectives.
>
> It is not needed labor to "produce" money, but Labor is needed in the
> productive process, and employees are needed to demand production. How can
> we start the virtuous cycle?.
>
> >From: "Canova, Timothy" <CANOVA@xxxxxxxxxxx>
> >To: "'pkt@xxxxxxxxxxxxxxxx'" <pkt@xxxxxxxxxxxxxxxx>, Lissette Wendy Moreno
> >Villanueva <wendymoreno@xxxxxxxxxxx>
> >Subject: RE: if money grew on trees, or in the ground
> >Date: Wed, 7 Mar 2001 15:52:11 -0700
> >
> >From the General Theory:
> >
> >"'To dig holes in the ground,' paid for out of savings, will increase, not
> >only employment, but the real national dividend of useful goods and
> >services. It is not reasonable, however, that a sensible community should
> >be content to remain dependent on such fortuitous and often wasteful
> >mitigations when once we understand the influences upon which effective
> >demand depends." (page 220)
> >
> >"If the Treasury were to fill old bottles with banknotes, bury them at
> >suitable depths in disused coal-mines which are then filled up to the
> >surface with town rubbish, and leave it to private enterprise on
well-tried
> >principles of laissez-faire to dig the notes up again (the right to do so
> >being obtained, of course, by tendering for leases of the note-bearing
> >territory), there need be no more unemployment and, with the help of the
> >repercussions, the real income of the community, and its capital wealth
> >also, would probably become a good deal greater than it actually is. It
> >would, indeed, be more sensible to build houses and the like; but if there
> >are political and practical difficulties in the way of this, the above
> >would
> >be better than nothing." (page 129)
> >
> >
> >
> >-----Original Message-----
> >From: Paul Davidson [mailto:pdavidson@xxxxxxx]
> >Sent: Wednesday, March 07, 2001 2:37 PM
> >To: Lissette Wendy Moreno Villanueva
> >Cc: pkt@xxxxxxxxxxxxxxxx
> >Subject: Re:
> >
> >
> >At 10:58 PM 3/6/01 +0000, you wrote:
> > >Money does not grow on trees, but it does as if...
> > >when someone decides to save some money at banks for example, can get x%
> > >of financial interest without moving a hand.
> >
> >NO -- you misunderstand -- if money did grow on trees then there would be
> >a need to hire labor to harvest the money trees (just as farm workers
pick
> >oranges in California ) and any increase in the demand for money to hold
> >as a store of value would create a demand for more farm workers to plant
> >and harvest more money trees.
> >
> >Paul
>
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