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July 28, 2006

Comments

chad

Class warfare is easy when only one side is playing the game...

Account Deleted

"our consumer economy"

A nearly meaningless statement. GDP focuses on final consumption, and analysts write breathlessly on the fact that GDP largely comes from consumersa.

That some believe this near-tautology to be meaningful is distressing...

John Robb

LOL. I wouldn't confuse a series of transactions that eventually creates an item that is bought by a consumer as larger than the end event itself. In fact, you could probably make the argument that for each dollar of consumer spending, the factor of it (the cumulative chain of transactions leading up to it) is quite large.

Dan tdaxp

you could probably make the argument that for each dollar of consumer spending, the factor of it (the cumulative chain of transactions leading up to it) is quite large.

Yes, and the same is true for each dollar of investor spending, each dollar of charity contributions, each dollar spent on rare diamonds, anything. The factor of any dollar (the cumulative chain of transactions leading up to it) is a mathematical fiction that merely tells us the sum velocity of money from the present point back to the creation of that dollar at some previous expansion of the money supply.

Indeed, as long as cash isn't physically stored under a matress (or taken out of circulation in some similar way), money keeps moving. The velocity of the money supply depends more on the liquidity of the economy than if it is a "consumer economy," an economy with "income inequality," or whatever.

phil jones

"Yes, and the same is true for each dollar of investor spending, each dollar of charity contributions, each dollar spent on rare diamonds, anything."

I wonder if that's true. If someone finds a diamond in the ground, polishes it up, and sells it for a million dollars, surely that million touched fewer people (and had a lower velocity) than a million dollars spent on a labour intensive manufactured good.

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