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Re: OT : does 2 really come after 1

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On Oct 31, 2004, at 1:18 PM, Jake Watson wrote:

How is it that
our economy today is worth more than 100x what it was 200 years ago? How do
I become the person who gets to introduce money into the economy?
It's really a double entry process. The haircut is also part of the economy even though it isn't money. When you've left the barber shop, your value is increased by the haircut and the barber's value has increased by the price of the haircut. If it's a fair transaction the value of the haircut equals the price. If he's a fairly clever barber he pays less than the price of the haircut so he's ahead in money, but you're ahead in the sort of personal appearance that will help you get that big job you're working on. So actually the economy has grown a little as a result of the transaction. As a result, while the amount of money is circulation hasn't changed the economy has grown.

Even if I borrow money, someone
has to have the money in the first place to loan it to me.
Not necessarily. Actual cash doesn't have to change hands during a loan. Banks very frequently loan out money they don't have as paper transactions, with the idea that they'll get paid back before the owner of the money actually needs it. In a way it's like working with a margin account or a bookie. You call up the bookie and place a bet, the idea being that if I win, he'll pay me and if I lose, I'll pay him. In effect a lot of people end up using the bookie's capital simultaneously--the bookie pays off the winners with the money he gets from the losers.
Christopher Wright P.E. |"They couldn't hit an elephant at
chrisw(--nospam--at)skypoint.com    | this distance" (last words of Gen.
...................................| John Sedgwick, Spotsylvania 1864)
http://www.skypoint.com/~chrisw/


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