I may be revealing my longstanding affinity with dinosaurs here, but I remember that a very long time ago I encountered the Quantity Theory of Money in Economics 101. The basic formula for the theory is MV=PT, where M is the quantity of money in circulation, V is its rate of circulation, P is the average price of all transactions, and T is the volume of transactions occurring during one period (all according to the very ancient macroeconomic textbook I still have on my shelves).
What may have happened since ancient times(and here I'm speculating), say fifty years ago, is that the nature of some of the variables may have changed quite radically (or at least very considerably). A long time ago, T would have consisted largely of goods and some services. Nowadays, it would still consist of goods, but the services part has increased hugely over previous volumes. And by services, I don't only mean seeing a lawyer or a doctor. I mean a very large increase in the kinds of paper people are trading and selling to each other, stocks, bonds, funds of various kinds, derivatives, etc. Instead of consisting mostly of the ploddy things you buy at the store, T has become a rapidly spinning maelstrom of investment certificates and because T is spinning rapidly, so is V. M and P need not necessarily increase, but of course they have too. M consists of something you can put in your pocket, like coins or paper, and credit. What seems to have happened over the last few decades is that the credit part of it has increased greatly via instruments such as credit cards, mortgages and other methods of borrowing. With increases in M, V and T have come increases in P. What has probably not kept pace is something we might call W, wages or personal incomes, a matter which, if true, could pose some pretty big problems for people that are fulfilling their dreams on credit. There, I've said it as plainly as I can, perhaps having revealed that I'm nothing more than a dinosaur. Ed
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