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To: Starwind
Repaying debt is the compensation of prior spending of borrowed money. It is not additional spending.

Compensation? The bank spent the money when it loaned it to you, and you are spending it when you pay it back, with interest, which cannot qualify as anything other than spending.

The velocity of money is the frequency the same dollar is spent. The multiplier-effect deals with money creation, which may or may not have a bearing on its velocity.

68 posted on 08/20/2003 9:44:43 AM PDT by 1rudeboy
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To: 1rudeboy
The bank spent the money when it loaned it to you, and you are spending it when you pay it back, with interest, which cannot qualify as anything other than spending.

You have some basic misunderstandings of the definitions of loan, borrow, spend, etc.

You might start with Campbell R. Harvey's Hypertextual Finance Glossary

The velocity of money is the frequency the same dollar is spent.

Yes. I said as much - that when the same 'money supply' is spent velocity increases (not when debt is repaid) but when money (borrowed or saved) is spent, and I gave a non-loan cash example where the velocity increases but not the multiple.

The multiplier-effect deals with money creation, which may or may not have a bearing on its velocity.

Yes, I said they were related but not the same, and I said the multiplier effect happens when the same 'money supply' is loaned/borrowed (not spent, but loaned & borrowed - spending does not multiply money - only borrowing via a fractional reserve banking system multiplies the money supply).

70 posted on 08/20/2003 10:14:54 AM PDT by Starwind
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