From: wlsmith@valve.heart.rri.uwo.ca (Wayne Smith)
Subject: Re: Bank of Canada and printing money.
Organization: The John P. Robarts Research Institute, London, Ontario
Distribution: can
Date: Mon, 14 Dec 1992 04:38:52 GMT

In article <Bz87F5.35n@watserv1.uwaterloo.ca> tjdoran@watserv1.uwaterloo.ca (DORAN TJ - BIOLOGY) writes:
>I deleted the article beacause it's *really* long. To summarize, the author
>speculated that velocity of money was the key factor in a healthy economy,and
>by having to send more and more money through the gov't (a slow institution)
>we are losing more and more velocity, and, therefore suffering more and more...

But I did have a 1 or 2 paragraph conclusion...

>Anyway, the GNP is a measure not of velocity, but of production.
>
>If I had a '74 El Camino (hypothetically speaking, of course) and sold it to 
>my good friend Ed for $250, that money would not be included in a calculation
>of GNP because nothing was created. If, however, I had a company making copies
>of '74 El Caminos, the money I sold each one for *would* be included since I
>actually produced something new of value. 

We have an increasingly service based economy which produces nothing,
chief among them being financial services.  If you sold that car to your
friend, and you included it in your tax return, then maybe the gov't 
(or stats can) would include it in the gnp.  Conversely, that $250 that
your friend used to buy the car was paid to him as a salary, and that
salary was a small part of some corporation's cash flow, which again
get's counted by the gov't (or stats can).

(If everyone, all 27 million, had $500 of "underground" income during the
year, the total of that underground economy is less than 3% of the $550
billion dollar GNP)

>The shortcoming of GNP is that it fails to look at such transactions as Ed 
>buying my (hypothetical) El Camino. It also fails to look at non-monetary
>based transactions.. (I'll cut your hair if you mow my lawn) and do-it-yerself 
>stuff.

If you look at the cash flow of the nation, you don't need to know what
every person did with their every dollar to know what the gnp is.  You
know that there is an average amount of money that a working person will
get per year, and they will either spend the entire amount, go into debt,
or save some of it.  What they spend will show up on the books of
companies and corporations as gross sales, and what they get loaned or
what they save will end up on the books of financial institutions.

Excercise 1: Find the dollars.

Look.  We're in a recession.  But what is a recession?  Where is all the
money in Canada right now?  Is it tied up in various accounts (personal,
provincial, federal?)? We have $35 billion more dollars injected into
the economy this year.  We are not losing money.  So where is it?

Excercise 2: How many dollars are there?

If the "net-value" of a person or institution is their net monentary worth
(bank accounts, stocks, bonds, cash, NOT capital), what would be Canada's
sum total? 

Conclusion:
Our money is not circulating FAST enough.  This is testable.  
I would guess that the higher the per-capita GNP, the better the economy.
So who's got the best economy right now?  Japan? Germany? Sweeden?
What's their per capita GNP?