Services Are Pure Velocity

...Not necessarily always productive, perhaps, but give me a chance to explain! Most of the notes for this post were already compiled, when I came across Miles Kimball's  Storify, on velocity. At the link, one will find relatively traditional descriptions of velocity - one might say the standard paved road, so to speak. For me, this post is reminiscent of some interesting back road trails explored over the decades, so perhaps an "adventure" of a similar sort in the mind! (I know, I don't "get out" enough these days)

The monetary phenomenon we call velocity has decreased somewhat over time, with no clear rationale as to why. Some aren't necessarily crazy about the word - I remember a conversation at The Money Illusion  a year or two ago, where one commenter said he didn't like it. Just the same, it's the way we measure money in circulation through time increments. While the measure may seem confusing in some respects, it matters much more than may be immediately obvious. Most importantly, there is a contrast between the elements of velocity which flow to what gets termed as "actual wealth" (frequently contractual), and services. While monetary flows may be "caught" long term in assets to some degree, other velocity flows more freely and frequently, in "ephemeral" services with seemingly no intent but the present. What goes to services is questioned by some: where is the value in a residual time factor that does not create additional wealth on its own...

In a certain literal sense, this has at times been true. But think about it: If we do not want the service, what do we want in economic terms that causes us to purchase something in association with the service itself? Just like the expression "all dressed up with no place to go": why buy the outfit, if indeed that is the case? Services are like electrical current that runs through the conduits of our physical assets, hence are also what brings assets to "life". If the residual (ongoing) monetary flow falls short in per capita terms, the "hot potato" effect of monetary policy has the potential to bring more to services options, which are frequently the first activity to fall short when NGDP is insufficiently targeted. One reason this process may not be immediately obvious is the degree to which previous flows are caught in fluctuating tax assessments.

When GDP is measured, it's not the assets that are getting measured, it's the money that gets spent on "all of the above" in certain timeframes. That's why we miss the focus, when we try to focus on precise amounts of debt or contractual obligation as the appropriate  measure, which actually appear as random elements in the measured monetary flows in contrast to their perceived values. On the other hand, both elements of income and time based services show up in the nominal measure counts, in an immediate sense. This is precisely why I call services pure velocity. Services are dynamic in the sense that they are ongoing and lead to additional monetary flow, when they are not interrupted.

So it seems reasonable to call services the heartbeat of the economy. We are measuring economic momentum, not those "lucky" assets that increase in value primarily because of the momentum itself (duh). Assets are a passive aspect of wealth which tends to gain or lose value on a lag, while services are an active and present aspect, which also can drive the potential payoff of the investment. One can have a home in a really nice neighborhood, but if the area somehow gets cut off from good employment opportunities, the home values will eventually suffer. Debt contracts valuations can also go underwater when they are relied on as drivers of (monetary) service flow origination, which is just one reason why services need to be visualized in more sustainable terms. Such terms need far more consideration than simply moving away from government  redistribution to the currently structured private marketplace, which also remains highly unbalanced in terms of knowledge use.

Economic sustainability requires ongoing momentum, which especially emphasizes flexible and changeable motion in terms of economic reciprocity (recall the mobile in the recent post on dysfunction). One of the primary reasons it is so important to create independent structures for services is so that we do not revert back to a pre economic state, i.e. a default back into settings where many services take place outside of planned monetary arrangements. Such default settings include servitude and forced slavery in many forms for the poor (not even considering today's imprisonment levels), also forced familial and even "tribal" settings which see all outside activity as pure coercion. Some subdivisions are already seeing an uncomfortable degree of reversion (including  prostitution) in parts of the U.S., as vital aspects of economic activities dwindle among lower income. The group Rush sang about the exclusionary nature of subdivisions in one of my favorite songs, years ago ("...be cool or be cast out"). Once we go too far down the road to exclusion, it can be hard to find our way back, to inclusion.

People on the right are understandably uncertain about continuing increases in asset values to maintain services. People on the left are justifiably concerned about their own ability to thrive, in an environment where services cannot simply expand based on demand under current conditions. But there are some on the right who are seeking ways to continue momentum (freeing activity to more participants) while others on the left continue to hesitate. For them, spontaneous service offerings outside institutional settings may represent competition to the subsidized institution, so they inadvertently join forces with entrenched interests on the right in this regard . While liquidating (subsidizing) or auctioning unneeded services may appear feasible for those who are left out, this is not the way to maintain the vital structure that was built in the first place - a structure which relies on balance and utilization of all resources in order to remain strong. By minimizing services potential which does not appear  "necessary" in the present (a mistake by both the right and the left), the economic organism is ultimately weakened.

There's also an aspect about this I want to explore before I forget: why, in a time of greater services, has velocity decreased? Much of income is caught in contractual agreements of all kinds which consequently involve non spontaneous activity. However, spontaneous activity (eating out and shopping more, buying services from others who don't rely on redistribution, tax monies, or for profit knowledge collectives in institutional settings) has become more limited, so that the velocity that shows tends to be more in the form of time payments on preset activities.  Anyone who would open a business is up against these pre-existing commitments and taxes on the part of the consumer. Perhaps measured velocity has fallen in part as well, as institutions continue to outsource paid services to us on DIY terms. While this is primarily conjecture of course, it makes as much sense to me as an argument about velocity and the availability of ATMs!

Whether or not we continue momentum in the economy depends on our participation in both active and passive terms.  When we lose our ability to reciprocate for what we need from others, imbalances result. Sometimes the ability to reciprocate is actually out of our control, i.e. extreme disability, illness or social breakdown. But in the present, we have lost means of economic reciprocity every time someone appeared the least bit suboptimal in any way, and now society is paying the price. Services can not just be conceived in terms of situational wealth flows that are fortuitous primarily by limited coordination terms.

Consigning "unneeded" knowledge and skills to the dustbin of history is not an option - at least it's not an option to the stubborn host of this blog. Both wealth and spirit die a slow painful death, when people throw up their hands and speak of a future which relies on robots, slaves or indentured servants. We keep the velocity of services alive by acknowledging the life force they actually are, and then learning to coordinate them amongst us all on those terms. Options for sustainability especially include understanding what aspects of economic life are active as opposed to passive in this regard, which will be further explored in future posts.