Hughesair (Inflection Point)

Retired physician and air taxi operator, science writer and part time assistant professor, these editorials cover a wide range of topics. Mostly non political, mostly true, I write more from experience than from research and more from science than convention. Subjects cover medicine, Alaska aviation, economics, technology and an occasional book review. The Floatplane book is out there. I am currently working on Hippocrates a History of Medicine and Globalism. Enjoy!

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Sunday, February 07, 2021

Gross Domestic Product and Horsepower

 Janet Yellen, the Federal Reserve and politicians attempt to stimulate the economy by increasing the money supply by clever means. This is like pulling away from the stop sign with the gearshift left in high gear.  Nothing much happens.

RPM X Manifold pressure = Horsepower. 

Turnover X M1 money supply = GDP

Without sufficient RPM, stepping on thee gas not only strains the engine but the hoped for acceleration comes very slowly. The same thing happens with the economy. The perceived energy in the economy comes from the turnover, productivity and innovation. The money supply turns over many times in the economy in any given time, say a year, presently a little over five times. With a more energetic economy that turnover may exceed ten times. The Fed. Struggles to find a means of stimulating the turnover. Spending alone does not do it. You need productivity, jobs and discretionary income, both liquidity and RPM.



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