On Tuesday, May 14, 2002, at 08:10 AM, [EMAIL PROTECTED] wrote: > On 13 May 2002 at 18:27, R. A. Hettinga wrote: > >> Right, though I'm sure you're wishing it wasn't. Again, crime, >> illegal markets if you will are piddly bits of pocket fluff in the >> global economy. $4 trillion worth of foreign exchange alone happened >> today. > > How could this possibly be true? :ast I checked, GDP for the US > was about 10 trillion bucks a year, the combined GDP of > every nation on earth per year can't be more than 100 trillion, > most of which doesn't involve anything crosiing a border, > so how can there possibly be trillions of dollars worth of > foreign exchange a day? >
Because GDP is a measure (flawed, of course) of _production_, not of money being shipped around. (I'm assuming Hettinga was talking about overall money flows, not just payment for goods purchased, a narrower definition of "foreign exchange.") To see this simply, imagine your own annual income of, say, $50,000. (No insinuations intended as to your wealth or lack of it.) You could wire $20K to a bank, wire it again to another bank, wire it again....easy to have a total amount transferred that is many times your annual income. Economists talk about "velocity of money" and all, but this illustrates the point. The same money is being moved many times. Transactions are not just "You grow corn. I pay you for corn. Here is money." I have no idea whether the $4 trillion figure for a day is correct, but it's plausible. Checking with Google, I find this: "SWIFT is the industry-owned cooperative supplying secure messaging services and interface software to 7,000 financial institutions in 196 countries. SWIFT carried over 1.5 billion messages in 2001. The average daily value of payment messages on SWIFT is estimated to be above USD 6 trillion." http://www.globalcrossing.com/xml/news/2002/april/02.xml So, this is how the daily money flow can be so large compared to the daily GDP. --Tim May "Gun Control: The theory that a woman found dead in an alley, raped and strangled with her panty hose, is somehow morally superior to a woman explaining to police how her attacker got that fatal bullet wound"
