Some of the money can come from the rest of the world. During 1997-2005 foreing businesses were the source of 43% of the increase of circulating money.
Money exists only when circulates, because money value is the information carried by money during transactions. Money makes no sense without use, that is why the bank or somebody else will put it to work inmediatly.
Thus, the credit-money should be used in a way that the system can validate it as legitimate money. The Government is social property and cannot have individual property exchange with business persons.
Actually, there is no “stimulus” but only an inflow of credit-money to compensate the effects of a short-circuit that suddenly drained the circulation flows of money. It seems credible that the availability of some extra credit-money could accelerate the recovery of those flows, as compared with the natural process of transactions that creates money, but such effect is not the only change induced.
On the other side, we must consider that the lack of money sweeps business with a slim reserve of money. This process is irreversable, and the surge of new businesses and technologies has a slower development but is the actual stimulus that will push the system to recovery.
To put this in a scientific context, we must consider the general equation of money circulation:
X(1/D) + (dX) O (dt) = 0
X = dE/dMc = Property exchange rate (kinetic energy of product/money)
The increase of circulating money is only possible when offer (O) increases and demand (D)diminishes. The change of the product/money rate of property exchange is not possible unless either offer or demand change:
D = X /dMc
O = dMc / dX
The first change induced by extra credit-money must be an increase of prices, generated by additional loans to businesses and additional money for consumption. That will also induce in turn an increase of offer and a reduction of demand. However, the higher prices will also reduce the property exchange rate and the flow of merchandise.
Money cannot “stimulate” the flows, because Government do not create money. Only the economic system creates this specific component, which only exists when circulates.
When Government substitute makets with govermental projects, it interferes with economic laws, disrupt the system, creating disorder that must likely will show its face with inflation. The reduction of the roll of private property eliminate human reference points for the action of the general economic law of the social system, and this loss find no substitute in the "black hole" of the nobody-knows-where social property of Government.
Is there any other way to increase de flow of products and services, without to have to destroy the general economic law of the social system (every variation in the ownership implies a motion of money)? A tax reduction will generate a different chain of events. If we evaluate the tax reduction of 800 B$ in the virtual economic network of USA, we will have the following changes:
1-Income increase of 250 B$ (3%)
2-Offer of merchandise and services increase of 1.6%
3-Proportional decrease in Demand as per law of Offer and Demand:
The first change induced by extra credit-money must be an increase of prices, generated by additional loans to businesses and additional money for consumption. That will also induce in turn an increase of offer and a reduction of demand. However, the higher prices will also reduce the property exchange rate and the flow of merchandise.
Money cannot “stimulate” the flows, because Government do not create money. Only the economic system creates this specific component, which only exists when circulates.
When Government substitute makets with govermental projects, it interferes with economic laws, disrupt the system, creating disorder that must likely will show its face with inflation. The reduction of the roll of private property eliminate human reference points for the action of the general economic law of the social system, and this loss find no substitute in the "black hole" of the nobody-knows-where social property of Government.
Is there any other way to increase de flow of products and services, without to have to destroy the general economic law of the social system (every variation in the ownership implies a motion of money)? A tax reduction will generate a different chain of events. If we evaluate the tax reduction of 800 B$ in the virtual economic network of USA, we will have the following changes:
1-Income increase of 250 B$ (3%)
2-Offer of merchandise and services increase of 1.6%
3-Proportional decrease in Demand as per law of Offer and Demand:
a-Increase of 380 B$ in sales (1.6%)
b-Additional increase of 100 B$ of income
Note- The changes are calculated with the virtual economic system of 2005 and were compared with the effects of the mortage market meltdown using the same frame of 2005 data.
