[ExI] economic parableRe: Sudden outbreak of democracy baffles US pundits

The Avantguardian avantguardian2020 at yahoo.com
Tue Oct 7 21:15:03 UTC 2008

--- On Tue, 10/7/08, Stathis Papaioannou <stathisp at gmail.com> wrote:

> How does getting information in seconds rather than hours
> or days, as
> in the 1920's, prevent a depression?

Because the distinction between money and information is becoming blurred. The wealth that the U.S. recently lost never really existed to begin with except in people's minds. Consider the following example:

Suppose that there is an economy composed of three people Alice, Bob, and Carrol. Alice has the only dollar in the economy. Fiscal year 1 passes and Alice being the only one with any wealth clutches it tightly. At the end of year 1, the GDP of this economy is $1.00 and per capita GDP is $0.33. 

Now in year 2, Alice pays Bob the dollar to fix her toaster. Bob then pays Carrol the dollar for a cup of coffee. And Carrol pays Alice the dollar for a deep tissue massage. At the end of year 2, Alice is still the wealthiest of the three but the GDP of the their economy is now $3.00, their per capita GDP is $1.00, and there was still ever only one dollar in the economy.

What happened?

> In any case, even
> if the actual
> period of recession or depression doesn't last very
> long the memory of
> the severity of the crash will see to it that the prolonged
> bull
> market of the 1990's and 2000's won't be
> repeated for many years yet.

I doubt either bull or bear markets will last for more than a year or two nowadays, but there is occasionally *real* wealth added to the economy and that does steadily grow with time. And the real wealth is not affected by delusions of poverty or prosperity.

Stuart LaForge

"See them clamber, these nimble apes!  They clamber over one another, and thus scuffle into the mud and the abyss."- Friedrich Nietzsche


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