🚀 go-pugleaf

Bill Funk <skypilot@starlink.com> wrote:

> Peter Mlynek wrote:
> > If the fees for transactions do rise, this would result in greater
> > propensity to take out cash in larger amounts, which would decrease the
> > velocity of money.  Ceteris paribus, this lowering of velocity would
> > have negative impact on the ecomony.  Can anyone explain why this is
> > (assuming my reasoning is correct)?
>
> ==========
> I'm not saying I'm versed in macroeconomics, but here goes:
> This taking out larger amounts of money for each transaction doesn't seem
> to change anything except the frequency of use of the ATM. There's no
> correlation with how that money is spent, is there?

Yeah, that's what I, and pretty much everyone in the class, thought, but it
ain't that simple.  If you take $50 out each week vs $200 once every 4
weeks, you are spending about the same amount.  But, assuming that you
spend it evenly over the course of the period that you hold the money, you
have an average of $25 if you take it out weekly, or you have an average of
$100 if it is every 4 weeks.  The fact that people would be holding more
money in cash (in the matress, or wallets) if the fees per transaction
rise, would have some sort of an impact on the money supply, on the
economy, etc.  But I don't really know for sure how it works..... :(

--Peter Mlynek