Lack of Money Circulation in a Society is Identical to Poverty

OK, here is a question for readers-

Is there any difference between a ‘rich’ society where money does not circulate and a ‘poor’ one that lacks money?

Let me explain this with an example derived from the practice of medicine. If a person went into cardiogenic shock due to heart muscle damage after a large but initially survivable heart attack, is the person dying for lack of blood?

The correct answer is yes and no. While the effects of cardiogenic shock on the rest of the body are similar to those after a massive loss of blood, there is no significant reduction in the volume of blood after a massive heart attack. However its circulation and oxygenation-decarbonation are so severely disrupted that other organs in the body are functionally starved of blood, or more precisely what blood flow does for them.

Similarly an economic system with lots of ‘money’ but little to no flow of money is as poor as one without it. The value of money is linked to its ability to flow through a network of individuals thereby allowing economic activity. Without flow it is just a useless piece of metal, paper of magnetic state in a computer.

Comments?

  1. November 8, 2011 at 10:09 pm

    hahaha,

    Didn’t George Bush say the patriotic thing to do was spend money in the early 2000’s?

  2. November 9, 2011 at 7:36 am

    Part of the problem is the uncertain regulatory environment; businesses, having no idea what Obama’s going to pull out of the hat (tariffs, new regulations, more bailouts) are playing it safe – they’re storing up their money instead of investing in their business (by spending it), because they the uncertainty is making the future too unpredictable.

    Stonerwithaboner nails the common misconception of spending – that *consumerism* will save the economy. Not at all; frugal households would be a step in the right direction.

    What we need is businesses willing to spend on the things that will make their business better.

    • PT Barnum
      November 10, 2011 at 1:16 pm

      Fool or liar?

      Maybe a little bit of both?

  3. November 9, 2011 at 8:24 am

    Aurini,

    actually here are my feelings on money/debt:

    http://stonerwithaboner.wordpress.com/2011/08/06/debt/

    Ideally, one should be sitting on a pile of cash, though that is not what GW Bush or Diablo seem to be advocating…..

    Also, since everyone in this neck of the woods seems to like End of the World scenario’s one thing worth mentioning. I read about Germany after WW1 and deflation was so much that you could supposedly have a wheelbarrel full of cash just to buy bread or any other common item…. If something like that happened here, all the savers would be royally screwed….

  4. Matt Strictland
    November 9, 2011 at 10:20 am

    Some savings, I’d guess around 10% (aka thrift) is of benefit. A lot of savings is not.

    In order for for people to have income their has to be economic activity, i.e. other people have to spend. If savings rates get too high it leads to a situation where the nation in question must export its surplus in order to prevent a deflation spiral or an economic implosion .

    Government can make up for this to some degree but taxes can only get so high (this varies from society to society) and money printing unless its used to cut a check to buyers for local producers is not a good solution either.

    The root problem is that their already are too many net exporters and the world can’t handle another one especially as big as the US .

    We got around this by using the US as the buyer of last resort but inequality and economic screw ups in the US have rendered the US economy flat. Various tomfoolery has kept the illusion going but thats coming to an end.

    The net exporters can’t buy either as they have aging populations or not much else but poor people. They can’t build a better economy as they lack either human capital (developed world) and/or the social capital (China)

    The best solution is to stop making more than they need at home and rebalanced trade but as most of the exporters won’t take the hit to the standard of living. In addition, there are real issues with simply mandating a 24 hour maximum work week. People aren’t cogs and it would hurt skilled trades to a degree that it would hurt the overall economy.

    Probably the best solution is to go to social credit. You need to eliminate the welfare state and simply cut everyone a check all the time. This forces economic activity into the system. There are however two big downsides that have to be addressed,

    1st such money needs to go to local job creators, not factories in places that horde money and/or do not buy export goods

    2nd immigration has to be curtailed. If you offering this to say everyone who has been a adult for 18 years, a lot of people will come and live cheek to jowl and remit the money home.5k a year goes a long way in India or Mexico. It will also push wages down and hurt real growth . Social credit is meant to be a stopgap not a lifestyle
    This means having a mostly closed borders and a strong system of nationality. Given immigrant affinity voting (this was common among Whites in the past too, its not a race thing) and the justified lack of trust of the USG, well not easy.

  5. February 6, 2013 at 8:56 am

    Hey! No pile of cash for me yo! I spend everything the government gives me. I circulate that shit real good. I believe in giving back to the people and society. Things I do. Someone should declare me a saint and offer me president ship of this nation. With the power of my morality, I’d get things back to shape in no time. Advocatus would by my Veep and Stonerwithaboner would be ………. um! Er……….ah ………..the Drug Czar

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