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To: Ilaine who wrote (6134)	7/20/2001 12:26:34 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 74559

CB - ...Friedman defines the velocity of money as the ratio of money income to the stock of money. If there are 5 people who each earned $100 in a time period, and the money stock is $100, then the money stock changed hands five times during that time period. That is the velocity of money. As I said, an entirely meaningless concept. -g- Take your above example and try to convince me that the entire economic activity can't be accomplished by a small quantity of pennies passed about on an hourly basis as needed instead of waiting until the end of the month to use $100. For any economic activity, it is possible to imagine a supercomputer (Barter Central) whose only function is keep track of all the goods and services supplied and consumed and make sure that all the accounts are complete for a given period. It is also possible to assume that the entire matrix of exchanges of goods and services is identical to what it would be if the computer did not exist. With the computer, the ONLY need for money is to supply the desire to hold cash balances against the desire to have the flexibility to make purchases in the future. One thing, and one thing only, is important about money - how much of it are you willing and able to actually pay on the margin for a specific quantity of a specific good or service, taking an uncertain future into account? All of the concepts that relate to money, i.e. supply, credit, asset wealth, even sweepstakes expectations, actualize their effects on, and only on, the purchasing power of money. Regards, Don