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First pane is incorrect. If both constantly produced for each other they could accumulate way more than 2,000 worth of real assets. Correct: that neither couldn't have more than $2K, but this is obvious because only $2k exists, no kidding. The goods that both produce during a period of time could exceed many times the dollars in circulation.
money is not wealth it is a financial claim on wealth
Miller how would that work? On paper the value of goods could be over $2000 but who would buy it paying more? There's only $2000 in circulation so how can someone "pay" more? Mark-to-Market is not same as Mark-to-book. Where will the extra dollars come from?
The "units" in these equations are "$NFA"... so both of your observations are true imo...
ie they certainly can produce more than $2000 in real assets but they could never settle transactions for them in $NFA in an amount exceeding $2000.. if one or both of them saves $NFA, then the max transaction amount would be $2000 minus the $NFA savings amount...
Hi there. Great comments all. I was really trying to make the chart simple. It excludes trade deficits, and endogenous money. In the first panel, those $2,000 could trade hands quite a bit, but their net worth measured in dollars cannot exceed $2,000. The first panel was also a stepping stone to the next two to show how taxes and deficits drain, or add dollars to the economy.
Hopefully, the gist is correct to explain the basic process to a layperson - trying to get folks to understand that it is not a household budget.
7 comments:
It's cute but doesn't really explain anything.
http://www.addictinginfo.org/2013/03/04/americas-wealth-inequality-is-worse-than-you-think-video/
First pane is incorrect. If both constantly produced for each other they could accumulate way more than 2,000 worth of real assets. Correct: that neither couldn't have more than $2K, but this is obvious because only $2k exists, no kidding. The goods that both produce during a period of time could exceed many times the dollars in circulation.
money is not wealth it is a financial claim on wealth
Miller how would that work? On paper the value of goods could be over $2000 but who would buy it paying more? There's only $2000 in circulation so how can someone "pay" more? Mark-to-Market is not same as Mark-to-book. Where will the extra dollars come from?
miller/net,
The "units" in these equations are "$NFA"... so both of your observations are true imo...
ie they certainly can produce more than $2000 in real assets but they could never settle transactions for them in $NFA in an amount exceeding $2000.. if one or both of them saves $NFA, then the max transaction amount would be $2000 minus the $NFA savings amount...
rsp,
I think Matt Franko has it right.
Hi there. Great comments all. I was really trying to make the chart simple. It excludes trade deficits, and endogenous money. In the first panel, those $2,000 could trade hands quite a bit, but their net worth measured in dollars cannot exceed $2,000. The first panel was also a stepping stone to the next two to show how taxes and deficits drain, or add dollars to the economy.
Hopefully, the gist is correct to explain the basic process to a layperson - trying to get folks to understand that it is not a household budget.
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