> From: [EMAIL PROTECTED]
> it is true that things like stocks, bank accounts, "1mdc-like" things > (derivatives of money), and any and all financial instruments EXPAND > THE MONEY SUPPLY. Very few people know this, but it's true. Stocks do not expand the money supply because a share of stock is not money and does not circulate as money. It is very rare to trade a stock directly for goods and services. A stock must be sold for money, and then that money used to get goods and services. Buying a stock or selling a stock does not increase the amount of money in the economy, but only changes who holds that money. > For instance, lets say we lived in a universe of Fiat money (we do in > many ways!), issued by say the New Zealand government. So just > forget about gold and the like for now. NOW ... the NZ gov issues > say $10billion. It is true, as Robert says, that bizarrely all > things like building houses, making companies, and creating financial > instruments expands the money suipply of $10billion. (For instance, > say someone suddenly builds $1b worth of houses - those houses are > now things that can factually be used "like money", like the NZDollar > - so you have expanded the money supply.) Houses are not "like money" at all. Money is a widely accepted commodity used to give value to things and store value. No one "spends" a house for other goods and services. One may get a loan based on the value of the house, or someone may act differently if they perceive their house is worth a certain amount, but this does not change the money supply. You do not use your house as money. What you have to do is sell your house to get money. Let's say there is a total of $100b in the NZ money supply. Let's say I have $5m and I give it to you in exchange for you building a house for me. Now how big is the money supply? $100b. Only now the ownership of $5m of that money has switched from me to you. You could give me back the $5m in exchange for me building you a boat. We could go back and forth 1000 times building 1000 houses and 1000 boats, but the money supply in the country would still be only $100b. Money changes hands every day and millions of things are built, grown and manufactured, but the size of the money supply, the amount of dollars in the economy, does not change because of it. Similarly, the amount of gold coming out of the ground does not add to the money supply if people do not spend gold as money. They buy gold with fiat money, hold it as they would any commodity, and sell it back for money if they want to use that value. If any commodity, like rice, was widely circulated as money, as directly exchangeable for all manners of other goods, then a tripling of the rice harvest would expand the money supply. But if rice is not used as money, a tripling of the rice harvest will only reduce it's value in terms of whatever IS circulating as money (like $/lb of rice). The value of the rice will change rather than changing the supply of money. When gold was widely used as "the" money, more gold out of the ground = larger money supply. Now that gold is not used as the money, more gold out of the ground does not change the money supply, it changes the PRICE of gold (price in terms of whatever IS acting as money, in this case $/oz or other fiat/oz). Gold having a "price" is relatively new. In the past gold was money, and gold having a price made as much sense as today asking what is the price of a dollar. Money is funny stuff. It's really just a fancy novelty token to facilitate the trading of labor. Money is a labor representation that makes it happen and makes sure whatever is produced is what the people want by creating a concept of a "price". Manipulating the number of tokens in an economy is worthless and stupid, and does nothing to help the "economy". The economy is really just people waking up and putting in effort to make products and services. Wealth, which is what is really desired, means how much do we have of stuff we want. The more stuff that exists that is what people want, the wealthier a world is. Changing the number of tokens does not produce more stuff nor does it cause people to do more work or create more stuff. Money is a measurement component for an economic system, and screwing with the reference measurement for a system is only going to screw up that system. - John --- http://cambist.net --- You are currently subscribed to e-gold-list as: [EMAIL PROTECTED] To unsubscribe send a blank email to [EMAIL PROTECTED] Use e-gold's Secure Randomized Keyboard (SRK) when accessing your e-gold account(s) via the web and shopping cart interfaces to help thwart keystroke loggers and common viruses.
