Tuesday, 28 April 2009

Money disappearing in to thin air

Last month I wrote an article about how money disappears in to thin air when there is a preponderance of people paying back loans. In it I expressed surprise at how it seemed that almost nobody was discussing this effect, I felt like I was the only person to have noticed it! Now at last I have found some support from a section of the book "The Origin of Financial Crises" by George Cooper. Please read the following section:

I suspect that anyone who is not fully aware of this phenomenon can not conceivably understand what is going on in this financial crisis... at that includes almost everyone!


  1. interesting blog, Mick

    I suspect you need to find a really up-to-date mathematical economist who can direct you to a bunch of recent work that will save you a lot of time and brain-cudgelling, & enable you to 'sling-shot' forward

    BTW I have read your if you only ever read one post which is a case in point. You've chosen to recognise a 'what-you've-got-already' effect, but there could be loads more subtleties of the same kind to be built into your equation

    the Imelda Marcos effect: the more shoes you've got, the more you want

    [ W_gt(G+X,t)+W_mt(M-C,t) > W_gt(G,t)+W_mt(M,t) for all values of G, and possibly all values of C ! ]

    (which flies in the face of traditional economics which assumes a declining marginal value of additional goods)

    the car-as-penis-extension effect (famously described by Taleb): I always think my new car (X) is going to make me more attractive to women, except that upon reflection I recall that this never happens

    [ W_gt(G+X,t) << W_gt(G+X, t+delta) ! where delta is very small ]

    and so on and so on

    I am no leftie, but I do enjoy some of the stuff on this blog: Tom (a who is a leftie) explores a lot of interesting behavioural economics

  2. link in the final sentence seems to have failed: try


  3. I'm glad you like some of my stuff. Maybe you could give me a link, as so far there's almost nobody reading my blog :-(

    I'd be delighted to read an up-to-date mathematical economist - but I'm not sure where to look.

    Thanks for the heads up on the Imelda Marcos and car-as-penis-extension effects!

  4. Hi Mick. Oh, I like the excerpt from George Cooper and your comments on it. You can forget all the stuff about what saving is and how many people can save at once and all the other emperor's new esoteric clothes, and focus on this one issue. And do well thereby, I think.