Money can be counted multiple times because it can be spent multiple times. The parent commenter did commit what I believe to be somewhat of a misnomer by calling it “accumulation”, but a business that is earning more and spending more will contribute to an economy that feels richer, even if the amount of actual money in circulation has not increased.
Think of a simple circular economy situation. There is one coin and I have it. I grow bananas and you grow mangoes. I trade you the coin for a mango. Tomorrow, you trade the coin back to me for a bunch of bananas. Money is fungible so we don’t actually know or care that it’s the same coin, just that it’s a coin. The next day, I trade the coin back to you for another mango. We do this 100 times. Assume we are not trading for fun and actually consume the fruit. Even though there was only ever one coin, you earned it 100 times by selling 100 mangoes, and I earned it 100 times by selling 100 bananas. So you earned 100 coins and spent 100 coins, while I also earned 100 coins and spent 100 coins. So we collectively feel like we’ve earned and spent a total of 200 coins between us, but yet only one physical coin existed.
You might notice that people’s income can theoretically increase without bound as long as there is still stuff to trade for, even with a finite number of coins.
In contrast, suppose instead of trading the coin back and forth for fruit, I decided to hoard the coin on the 50th day and just eat the bananas myself. I’d have earned 51 coins and spent 50 coins. You will have earned 50 coins and spent 50 coins. My act of hoarding the coin has halved both our incomes because the trading stopped. Yet the number of coins in circulation is still only one.
Why couldn’t I just hoard the coin and then directly trade you bananas for mangoes?
In this simple scenario, I obviously could, but in a more complex economy, barter is hard because it’s far more difficult to find a willing partner.
How does this scale to larger economies?
Suppose a cassava farmer and a durian farmer join us, and the number of coins in circulation goes up to four as well. We can still continue to trade amongst ourselves, but eventually, one of us might decide to hoard one of the coins, because we feel the need to save for uncertainty, for example. In that case, it’s possible that one of the other parties might find themselves wanting to sell their cassava, but the person who wants the cassava doesn’t have a coin, and they can’t get a coin because the person who has the coin, doesn’t want durians. Now the economy breaks down.
If there were 100 people and 500 coins, this is far less likely, but if everyone decides to each start saving a few of the coins, eventually the number of coins actually being spent and circulating will dwindle and you’ll see people being stuck with goods that they can’t sell (because the buyers have no coins), and they have to wait until those buyers obtain a coin. This reduces their income over the 100 days because they would have skipped a day where they sold nothing. Functionally, this is more or less what happens in a recession.
Money can be counted multiple times because it can be spent multiple times. The parent commenter did commit what I believe to be somewhat of a misnomer by calling it “accumulation”, but a business that is earning more and spending more will contribute to an economy that feels richer, even if the amount of actual money in circulation has not increased.
Think of a simple circular economy situation. There is one coin and I have it. I grow bananas and you grow mangoes. I trade you the coin for a mango. Tomorrow, you trade the coin back to me for a bunch of bananas. Money is fungible so we don’t actually know or care that it’s the same coin, just that it’s a coin. The next day, I trade the coin back to you for another mango. We do this 100 times. Assume we are not trading for fun and actually consume the fruit. Even though there was only ever one coin, you earned it 100 times by selling 100 mangoes, and I earned it 100 times by selling 100 bananas. So you earned 100 coins and spent 100 coins, while I also earned 100 coins and spent 100 coins. So we collectively feel like we’ve earned and spent a total of 200 coins between us, but yet only one physical coin existed.
You might notice that people’s income can theoretically increase without bound as long as there is still stuff to trade for, even with a finite number of coins.
In contrast, suppose instead of trading the coin back and forth for fruit, I decided to hoard the coin on the 50th day and just eat the bananas myself. I’d have earned 51 coins and spent 50 coins. You will have earned 50 coins and spent 50 coins. My act of hoarding the coin has halved both our incomes because the trading stopped. Yet the number of coins in circulation is still only one.
Why couldn’t I just hoard the coin and then directly trade you bananas for mangoes?
In this simple scenario, I obviously could, but in a more complex economy, barter is hard because it’s far more difficult to find a willing partner.
How does this scale to larger economies?
Suppose a cassava farmer and a durian farmer join us, and the number of coins in circulation goes up to four as well. We can still continue to trade amongst ourselves, but eventually, one of us might decide to hoard one of the coins, because we feel the need to save for uncertainty, for example. In that case, it’s possible that one of the other parties might find themselves wanting to sell their cassava, but the person who wants the cassava doesn’t have a coin, and they can’t get a coin because the person who has the coin, doesn’t want durians. Now the economy breaks down.
If there were 100 people and 500 coins, this is far less likely, but if everyone decides to each start saving a few of the coins, eventually the number of coins actually being spent and circulating will dwindle and you’ll see people being stuck with goods that they can’t sell (because the buyers have no coins), and they have to wait until those buyers obtain a coin. This reduces their income over the 100 days because they would have skipped a day where they sold nothing. Functionally, this is more or less what happens in a recession.