[OPE-L:3695] RE: quantity of money in circulation

Paul Cockshott (wpc@cs.strath.ac.uk)
Fri, 22 Nov 1996 08:47:02 -0800 (PST)

[ show plain text ]

>Paul C wrote in [OPE-L:3688]:
>> As a stock of money on the other hand, there is no simple
>> mechanism whereby the stock will adjust to changes in the level
>> of real wealth. The stock of money is, under a credit money system,
>> equivalent to some subset of the total outstanding debt in the
>> economy. This is driven
>> a) by the imbalances between sectors' cash flows, in particular
>> by the tendancy of the rentier sector to be in financial surplus
>Please explain this tendency.
Paul C:
Unless the rentiers are facing the extinction as a class advocated
by Keynes, they will consume an amount that is less than or equal
to their incomes. Were they to consume more than their incomes, then
their capital would run down and they would fade away. Since
we observe that rentier classes are a permanent feature of capitalist
economies, so we conclude that the are likely to have a net financial

A more direct argument would be that their incomes are high, well
above that necessary to survive on, thus leaving them the opportunity
to save.

>> b) by the polarisation of the population of capitals into firms
>> who are forced to increase their gearing ratio and firms able
>> to reduce their gearing ratio
>What is the "gearing ratio"?

The gearing ratio of a firm is the ratio of bank debt to equity capital.
Paul Cockshott