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Money and Banking (Measuring the money supply – M1 and M2 (Do you recall…

- - - - It’s because the government regards savings accounts as “slow money” and requires that financial institutions treat it as such.
  - - - How is it possible that we only have about 15 trillion in money (M1 numbers are included in M2 numbers) but our GDP is 21 trillion?
      - How is that possible?
        
        Answer is Velocity
    - - This means it can “act” like more money based on how many times it changes hands.
- - - - borrow for the house today
      - per their contract, pay that loan back over a long period of time.
- - - - meaning that she, the second time she tried to:
        
        get a bag of wheat from the farmer, but
        the farmer didn’t want shoes
        
        went through a great deal of effort in order to find a market for her shoes
        
        had to do a “trade trail” to get what she wanted
      - This is terribly inefficient!
    - - Many who have studied history and economics also think something called “gift economy” was a big deal
        
        Rather than having an explicit contract or agreement for trade, we have a relationship and any trade happens implicitly.
  - - - We’ve known each other for generations.
    - - It’s a tragedy because I can’t have any more goats added to my herd without a male goat!
      - So I ask my neighbor for help. He happens to have a couple extra so he gives me one.
      - But we don’t make any formal agreement about me paying him back.
    - - I ask for help again because my potato crop has failed.
      - My neighbor’s land includes a river so he did okay despite the drought.
      - He helps me out again, also with no explicit agreement to return the favor.
    - - “Wow, your daughter is looking quite beautiful these days,” he says.
      - “Yes, I can’t believe she’s grown up now,” I respond.
      - “You know, my son has also grown and he’s quite lonely. And he fancy’s your daughter. Can he marry her?”
      - “Of course,” I say, relieved that I’m able to pay back some of my debt to this family and also glad because the marriage will make our families even closer for the future.
        
        (Sorry, ladies, you didn’t have as much choice back then!)
      - This is gift economy! Using our relationships, we trade for what we need without set-out payback times and amounts.
    - - https://www.youtube.com/watch?v=EaxjxICgahc
      - If you recall from the video on bartering we watched, it was noted that most currencies today don’t use the gold standard. Most currencies, in fact, are fiat currencies.
    - - https://www.youtube.com/watch?v=U8Yn5jT8Hyc