Suggestion for new measure of money

Discussion in 'Wall St. News' started by nitro, Jan 1, 2009.

  1. nitro


    In astronomy, 1 parsec is equal to approximately 30 trillion kilometres, or about 3.26 light years.

    I think we should adopt a similar "distance" measure for the net amount of money infused into the economy over a year by the FED. However, to keep the number normalized, a paryear will take inflation over the risk free rate into account. We will use 1 as the value of inflation in 2008. Then each year we multiply the inflation number by 1 paryear. So if the inflation rate goes up 2% in 2009, the new mutiplier will be 1.02. This allows us to compare money from different times.

    I suggest 1 paryear be equal to $3 Trillion dollars. Since the current inflation multiplier is 1.0, $3 Trillion means $3 Trillion which equals 1 paryear. Then we can talk about really big numbers easily. It also allows us to talk about GDP in paryears.

    I estimate that the FED will have to infuse an extra 2 paryears in 2009 to deal with new problems that arise.
  2. nitro


    Perhaps even better is to normalize paryear even more. We should say that a paryear is not a specific number, but only a ratio to GDP. So 100 paryear is whatever the GDP is for that year. Say GDP is $10 Trillion. Then 100 paryear in 2008 is $10T. Now we say that the FED infuses $5T into the economy for 2009, and the GDP goes from 10T to 15T, then that would be 33 paryear. This of course is the same as percent, with the unit being trillions of dollars.

    This way we only talk about money in relation to what we produce.

    The point is to use a new measure that means something, instead of using meaningless numbers like $3 Trillion. $3T inflated in a $10T GDP economy is not the same as $3T in a deflationary environment where the GDP is $15T.
  3. Hmm, so $6trillion USD for 2009 bailout? I am confused. If the money of the past was derived from false assets, then it has to be printed, yes?
  4. It never actually gets printed, it's just a digital number in a computer screen. Only a very very small percentage of our outstanding money supply exists in physical paper.

  5. So the digital number is what the paper number will be in the future because of interest?
  6. I did not mean to off topic your thread Nitro.
  7. nitro


    It doesn't bother me one bit where a thread goes. I just don't have the time to respond.