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To: GraceZ who wrote (2403)	6/11/2003 1:32:47 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 4905

Grace, Money is just a medium of exchange. If the number and value of exchanges goes up the money supply has to grow in order to provide enough "medium of exchange" to transact. This is a common fallacy, but completely wrong. The scarcity value of money comes from its demand to be held as a store of future purchasing power, and has next to nothing to do with the number and value of transactions. Every dollar of the money supply is always owned by a single someone every nanosecond, while transactions are instantaneous and do not reflect a net demand on, or a consumption of, the money supply. If you want to buy something that costs a million dollars and you only have $100 in cash, it's not simply the lack of money that prevents your transaction, but rather the lack of other assets that can be converted into money, sequentially, if necessary. Regards, Don

To: GraceZ who wrote (2403)	6/11/2003 1:45:38 PM
From: yard_man	Read Replies (2) \| Respond to of 4905

>>Money is just a medium of exchange. If the number and value of exchanges goes up the money supply has to grow in order to provide enough "medium of exchange" to transact.<< Simply untrue. Beyond being conveniently divisible -- there is no "right amount" of money. What is important is that the supply be stable without reference to the amount of activity taking place. Growth in the formation of real capital (resources that can be reinvested in new or additional production) by no means requires the expansion of the money supply -- one could almost say the reverse -- to the extent that new currency is exchanged for something, but acquired for nothing. >>The negative consequences of the money supply not growing fast enough to cover the growth in the economy is well documented. Back before people fully understood this we were plagued by debilitating periods of deflation and banking panics. << More revisionist BS!! What is needed for a healthy economy is capital accumulation in concert with the preference of consumers being freely expressed in the marketplace. Increasing capital formation and increasing productivity => naturally falling prices. Such naturally falling prices don't impede economic growth The examples you would cite are all precipitous declines brought about by the inflationary policies beforehand. H*ll!! It's going on right now ... the economic contraction we are seeing now (minus government spending) is the symptom of the easy money policy that went before. All avoidable.

To: GraceZ who wrote (2403)	6/11/2003 5:16:24 PM
From: LLCF	Respond to of 4905

<Money is just a medium of exchange. If the number and value of exchanges goes up the money supply has to grow in order to provide enough "medium of exchange" to transact.> That's not true of course... has happened plenty. < Oddly enough the long run history of the world shows that economic growth is the norm not the exception. > Yes, even when MS isn't 'growing'. < Oddly enough the long run history of the world shows that economic growth is the norm not the exception. > You're saying that the change in monetary policy has repealed the business cycle or smoothed it out... meanwhile you point out 'technology' has simply made the world so much better for everyone and created growth. The fact is no one knows what caused which [if the business cycle really IS smoother], let along throwing in all the other government safety nets and mechanisms to halt unwanted downturns. How do we know the government isn't simply unwittingly 'managing' the forest by stopping all the forest fires letting the underbrush build up for a bigger fire later? Fact is, we don't... there IS probably no ultimate truth. Someday I suppose things will be more clear. DAK