In Circulation

Hustle'n' Flow

Raging river. Meandering stream. Stagnant pond. The flow of water: sometimes more, sometimes less, sometimes not at all. The same is true of money.


Business people speak of "cash flow". What is that? Well, Wikipedia says:

Cash flow refers to the movement of cash into or out of a business, a project, or a financial product.... Cash flow is a generic term used differently depending on the context. It may be defined by users for their own purposes.

Cash flow is money in motion. Okay. And why is the movement of money important? It is important because without it there is no income. Without it there is no spending. Without it, there is no economy.

"Cash flow" in the big picture (and defined for my own purposes) is the same as "money in circulation." I prefer the phrase "money in circulation." As the Wikipedia says, the phrase "cash flow" is generic; its meaning is not well-defined.

The notion of cash-flow, or circulation, is not new. Quoted by Keynes, the great Locke wrote:

the natural Value of Money... depends on the whole quantity of the then passing Money of the Kingdom, in proportion to the whole Trade of the Kingdom...[and] not [only] on the quantity of money but the quickness of its circulation.

The quickness of its circulation. Recently -- about a year ago now -- we watched as a raging river of spending suddenly slowed. Economic slowdown, they called it. Recession, they said. Recession, accompanied by financial crisis, they pointed out. The quickness of cash flow changed dramatically and with little warning. A thing one sees but once in a lifetime.

Now some folks say we must do everything we can to prop up spending, and minimize the severity of the downturn. Others say we must let nature take its course, and let the thing work itself out. Me? I say if we ask the right questions, the answers are obvious. I say, we have not asked the right questions. We cannot, for we have misunderstood the simplest words.