Healthy economic growth

[Seal]

"One of the key drivers to healthy growth in an economy is liquidity."

How much truth does this statement carry? I see it quoted in this forum with references to economic texts. It makes me think about the function of traders in the greater economy. They will be driving a majority of the liquidity in the markets, taking that into account, would it be considered healthy growth?

When thinking into more depth, an online shop, say for example bitcoinstore (which I'm a big fan of) might trade $1mill in two months. This would involve a lot of people within the economy spending their coins in exchange for products. The benefits are easily seen and the growth in the economy easily visible.

On the other hand, a single trader with $5k in a margin account could rack up $1mill of traded volume within two weeks.

The original statement seems to suggest that the trader would benefit the economy more than the online shop.

From an economics perspective, what is healthy growth?

[ruletheworld]

Are you talking about liquidity or leverage?

Liquidity is certainly essential for easy transfer of money. It also opens up several new forms of businesses within the broader economy that couldn't have existed without liquidity (for example, something like a Bitcoin faucet could never exist without a very liquid currency). Also, if the currency is liquid, the premiums go down (on exchanges for instance) for buying and selling that currency either through other currencies or through goods/services produced.

[jag2k2]

Every economic transaction in the world takes a resource of some kind and uses energy to make something useful.  Some resources are directly renewable like food and timber and some are renewable through recycling methods which are energy intensive (steel and water, etc).

The economy isn't loosely correlated to energy the economy IS ENERGY.  Economic growth is only possible if you can have energy growth. World oil production hasn't increased since 2005.  So any real economic growth could have only come from technological improvements but those have a diminishing return.  Most economic growth today comes from governments running up huge deficits, pumping money into the system to give the appearance of growth.

But do we really need growth?  Is it healthy at all?  Growth is associated with rising standards of living but it is only "healthy" if the amount of energy/resources your economy consumes is less than the amount that is renewable by our surroundings.  Otherwise when those resources run out the standard of living must go down.  Unfortunately we are way past that point and our population or standard of living (or both) must go down eventually.  Solar/Wind sources just aren't growing fast enough to grow our economy AND replace current energy needs currently supplied by fossil fuels.

What would be healthy would be to grow up to the point of sustainable levels and then STOP GROWING.  What other organism on the planet can grow forever and be considered healthy?

[Seal]

Are you talking about liquidity or leverage?

Liquidity is certainly essential for easy transfer of money. It also opens up several new forms of businesses within the broader economy that couldn't have existed without liquidity (for example, something like a Bitcoin faucet could never exist without a very liquid currency). Also, if the currency is liquid, the premiums go down (on exchanges for instance) for buying and selling that currency either through other currencies or through goods/services produced.

Yeah I was referring to plain old liquidity.

[hashman]

"One of the key drivers to healthy growth in an economy is liquidity."

How much truth does this statement carry? I see it quoted in this forum with references to economic texts. It makes me think about the function of traders in the greater economy. They will be driving a majority of the liquidity in the markets, taking that into account, would it be considered healthy growth?

When thinking into more depth, an online shop, say for example bitcoinstore (which I'm a big fan of) might trade $1mill in two months. This would involve a lot of people within the economy spending their coins in exchange for products. The benefits are easily seen and the growth in the economy easily visible.

On the other hand, a single trader with $5k in a margin account could rack up $1mill of traded volume within two weeks.

The original statement seems to suggest that the trader would benefit the economy more than the online shop.

From an economics perspective, what is healthy growth?

I would ask, growth of what?  The landfills?  The area of the globe covered with desert?  The piles of crushed cars?  Or perhaps literacy?  Hash rate?  I'm no economist but clearly we need some better or at least more specific indicators.     

 
 

[notme]

"One of the key drivers to healthy growth in an economy is liquidity."

How much truth does this statement carry? I see it quoted in this forum with references to economic texts. It makes me think about the function of traders in the greater economy. They will be driving a majority of the liquidity in the markets, taking that into account, would it be considered healthy growth?

When thinking into more depth, an online shop, say for example bitcoinstore (which I'm a big fan of) might trade $1mill in two months. This would involve a lot of people within the economy spending their coins in exchange for products. The benefits are easily seen and the growth in the economy easily visible.

On the other hand, a single trader with $5k in a margin account could rack up $1mill of traded volume within two weeks.

The original statement seems to suggest that the trader would benefit the economy more than the online shop.

From an economics perspective, what is healthy growth?

"One of the key drivers to healthy growth in an economy is liquidity."

Liquidity is absolutely necessary to have healthy growth.  But there is only a certain amount of liquidity that the market needs and when a market becomes too crowded some participants get washed out.  It is usually the participants with the most exposure, i.e. the guy with 1 million in trade volume in two weeks.