Since the economy is in the Dipster Dumpster I have been thinking about money, and what happened to the little that I had accumulated.
Here are my thoughts, but first:
Assumed to be true:
a. The right of the individual to possess and own property is as old as recorded history. It is an assumed good.
b. The accumulation of those goods or properties which contribute to the owner's happiness is wealth in its good and proper sense. The inordinate desire for and accumulation of goods is the abuse of wealth and does not negate the proper use.
The thoughts, none of them original to the author:
1. All wealth is first local, then regional, national, and cross-national (I don't like the word inter-national)
2. Personal wealth in its elemental form is the result of labor applied to nature.
3. The wealth "pie", that is, the total wealth of a state or nation, can get bigger or smaller, depending on productivity, savings, growth, and sometimes just good luck. There is no fixed, permanent amount of wealth to divide.
4. The greater the population of an area, the greater the potential wealth.
5. All spending is the result of prior saving, even if the earnings have been saved for only minutes.
6. "Consumer spending" may be a sign of wealth but it is not the cause of wealth. Listen to the popular news and one is left with the idea that if everyone would spend everything they had saved, we would all be wealthier. Think about that a minute.
7. High demand for a commodity increases the value of the commodity, if the commodity has limited distribution. Dollars, like any commodity, increase and decrease in value based on supply. Inflation is the decreasing of the value of a dollar, not the increasing of the price of goods and services. Higher prices are the effect of inflation.
8. Civil governments do not produce wealth except in the general sense of "governing" the actions of wealth builders. A nation's wealth and the government's cash reserves are not the same thing. The cash reserves of the government are taken from the wealth of the taxpayer. The exception is the government that controls a highly valued commodity, as in the case of the United Arab Emirate countries who control the highly valued commodity, oil.
Corollary question: If it were true, as everyone seems to believe, that the issuer of currency (the government) could make everyone wealthier by issuing everyone a check for $100,000, why don't they?
9. Democracy, freedom and popular elections do not guarantee wealth. They are the "good soil" of prosperity. Frugality, industry, and honesty in transaction are better guarantors of wealth than the former. That is, give me the latter three in a monarchy and I am more likely to be wealthier (and happier) than someone in a democracy with wastefulness, dishonesty, and sloth.
10. In one sense, everything for sale is at an auction, like eBay, the difference is the amount of time it takes the seller to adjust prices based on the interest of the buyer.
11. Your turn. Please comment.
6 comments:
Francis,
Great post.
1. Agreed. Most economists take offense to the term "trickle down" economics. In most business enterprises, a whole lot of people at the bottom of the pyramid get to make some money before those at the top (the entrepreneurs?) get a shot at any.
2. I like the definition that P.J. O'Rourke quotes in "Eat The Rich" (Most entertaining Econ book ever written, BTW) "Wealth is created when assets are moved from lower valued uses to higher valued uses."
3. Try explaining that to the Democratic National Committee. They generally see one person's gain as someone else's loss.
4. Yes, but those small population areas have admirably small Carbon Footprints.
5. Here's the one area where I disagree with you so far. Governments can spend without saving first, since they alone can print money. Also, easy credit is a way of doing the same thing. Both of these practices lead to the Dipsy Dumpster in your post, right?
6. I think you have discovered (on your own?) something that economists call "Say's Law". I still don't fully understand it, but wikipedia has a good entry.
7. Yep. And that's why, according to Ludwig von Mises, governments prefer that you speak of rising prices instead of excess dollars. Governments are generally the greatest debtors, and debtors are helped the most by inflation.
8. First statement: Amen, Hallelujah, and Preach On !
Corollary statement: Because even the current gang of pirates and buccaneers running the government know what that would do to inflation. (They're going to do it, though, just very, very slowly as the Baby Boom retires. That's the only way that they can meet their obligations.)
9. Yep. You could add "A System Of Laws To Enforce Contracts" to your list of guarantors of prosperity. Also, you would really enjoy P.J. O'Rourke's "Eat The Rich". He covers a lot of that same ground, and will make you laugh out loud every two pages.
10. Yep. Sometimes it's the standard American model auction, where prices start low and go high (Ebay). Others are the Dutch model, where prices start ridiculously high, attract a few buyers, and then the price falls and falls until all products are sold (any shopping mall).
11. Done ! Great post, sir !
TWS:
1. I like the O'Rourke quote. I have been given his books and have never read them. I'll pick up a copy of "Eat the Rich".
5. Yes, they can, they have, and get ready for real inflation if the current "loans" tank, because they will be printing a whole bunch more.
6. I will look into Says Law. Not familiar with it.
Thanks.
All developed governments for all time have played fast and loose with their currencies. It is the easy for those in power to gain brief political gain by devaluing the currency and increasing temporarily the wealth of the people.
Andrew -- you are correct, sir.
I found you through a search for Grace, the restaurant. Very glad to have found you and will add you to my Bloglines.
Thanks Lynn, welcome, and I will do the same.
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