Sabri wrote: > Firstly, money has never been infinite and will never be. Because it > can be destroyed as easily as it can be created, and given the complex > financial system we are surrounded by, this has nothing to do with the > labor productivity. By lending and borrowing, Chris and I can create > money between the two of us with no difficulty, as long as the debtor > between the two of us is credible, that is, it is believed that the > debtor can make good on his debt, so that the creditor can use the > debt he owns to buy other stuff. > > Notice that I am talking about beliefs, not realities. Labor and > productivity are about realities, not about beliefs. > > When beliefs change and credibility is lost, money gets destroyed.
In a sense, what Sabri says is correct. Money's creation and destruction (i.e. its flow or change in its stock) is unrelated to labor productivity, in that it doesn't necessarily have anything to do with whether productivity goes up or down or stays the same. However, that's not what I'm talking about. The existing stock of money at a point in time is not unrelated to the existing amount of wealth in the economy. There's a *definite* economic relationship between them, which is captured by the notion of purchasing power, or its reciprocal (prices). And the existing amount of wealth in the economy is related to labor productivity. Sabri and I are emphasizing two different things. Sabri is saying that the dynamics of money (or, more generally, debt creation) follows its own logic. I'm saying yes, but financial assets are ultimately claims over real wealth (or its change, income). In a potluck party, people cannot eat (or waste) more than they collectively bring to the party. The relationship between the real wealth the assets claim and the assets themselves is captured by their prices. Those prices can never be infinite. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
