Replies to post #622640 on Zeev's Turnips Patch-No Politics (ZEEV)

[brainlessone]

newly i thought VOm was just the sum of the number of transactions the same amount of money did in one year, usually expressed as a limit to an infinite series, so the exponent number on the series is the VOM.

in other words the number of buys and sells of anything

[brainlessone]

newly i thought VOm was just the sum of the number of transactions the same amount of money did in one year, usually expressed as a limit to an infinite series, so the exponent number on the series is the VOM.

in other words the number of buys and sells of anything

[brightness]

IMHO, the actual theory of VOM is very muddled, much like the rest of Keynes' writings, talking about one thing but really meant something else altogether. What I have been writing is not meant as criticism of you (or of anyone else in this forum). I took quite a few macro courses in college along Keynesian lines, and it took a while to de-program afterwards. LOL.

The actual theory of VOM suffers from two problems:

(1) It actually mostly talks about economic exchanges (not so much about financial new money creation). In an ideal economy without taxation, exchange and trade promote specialization; that in itself is economic advance. However, with taxation pervasive in our society, money is literally taken out of the economy every time economic transaction takes place.

In a more benign/accommodative credit environment, it is the creation of new money by consumer borrowing and entreprenuer expanding their businesses based on expanding income/business volume that plug the leaky holes created by taxation. That of course creates its own problems, like you mentioned several times earlier, Newly, not all loans taken out are good investments (especially loans taken out for consumption. LOL) The theory of VOM does not address this point at all, so it essentially describes a process where money would rapidly leak out due to taxation without actually noting the leakage.

(2) Many of those transactions actually involve cost of production (like the stationary store owner buying the pen), not final product, so transactions do not equal GDP. Of course, Keynesians are not the least concerned about the profitabilty of economic endeavors (i.e. the whole point of "economising" and economics). Instead, Keynesians would rather focus on their artificial statistics, coming to the logical conclusion that the government can jump start the economy (by which they mean official GDP statistic not people's livelihood or well being) by insisting on paying $64,000 for every toilet instead of the prevailing market price of $64 for the same toilet. LOL. Of course, they then blithely ignore the different consequences on toilet suppliers vs. the rest of the population who are not engaged in toilet making but have to pay taxes to fund the future interest payment on that $64,000.