[Previous entry: "Some stupid links"] [Main Index] [Next entry: "Incredible blog-story"]

04/06/2003 Archived Entry: "Some not-very-well-organized thoughts on money and wealth and war"

Ok, so you managed to nail one thing to another thing and some poor schmuck is going to buy it. You accept $30 for it. You haven't created any money, since that is a finite resource...but you have created $30 worth of 'wealth'. If the art buyer managed to bring it to a gallery and some other art buyer picks it up for $530, then $500 worth of wealth is created...no money is created. Then you die, and the value of the two things nailed together skyrockets to $1,000,530. Now an additional million bucks worth of wealth is created! Cool! No more money is available, since this is all based on what someone decided something is worth. The government, seeing that there are more objects worth something that there is money available to buy it, prints an extra $1,000,530. Cool! Now there is really money out there to give a real value to the wealth that your art has created. Then the nail you used rusts and the objet d'art is worthless. It can't be sold and although throughout the above product had shifted around a whole buttload of money, it is done creating wealth.

Suddenly there is much more money in the economy than there are goods that are worth that money. The government decides that as the money is used up and returned (paper money wears out) they will take $1,000,530 out of the economy by not replacing it. Unfortunately, you and the art buyer(s) now have more expendable cash and are using it to buy cool stuff. The people who sell cool stuff up their prices, knowing that you are flush and the general rules of thumb is "what the markets will bear". This is inflation and things cost more, except that the government didn't plan for this and now we're all caught in a situation where our dollars are worth less and the prices are higher and there are less cool things to buy (ie. the art thing you created out of two things and a nail).

Now shift all of this over to the dot-com economy for a while...a bunch of people created things that were crafted out of flimsy nails (dot-com corporations) that quickly gained value and then were suddenly snuffed out. The money that was put into them was compensated for by the government printing $'s. A bunch of people got out of the dot-com economy while the money was good (don't believe for a second that no one came away wealthy....just remember how much domain names that were purchased for $70 from Network Solutions were sold to dumbass execs for millions in investor money and that the original owners of those domains bought the sailboat they always wanted and that the crappy execs walked away with $500k/year salaries) and now things are more expensive for all of us because the government has to be reactive to these sorts of wealth gains and losses and therefore when the bottom fell out they destroyed money. See the original art example if you got lost.

So Mr. Government Economist is sitting in his white tower thinking about what he can do to turn this around...well...the government can always create something out of nothing and sell it for their own money! They can create a war and sell it to arms manufacturers and tank designers and people who can make a cheese sandwich last 80 years and still be edible. They can purchase these services for money that they print, thereby pumping cash into the economy and giving us a good ol' time spending it. But eventually that war will end (ie. the object of value is destroyed) and suddenly we are all holding our fattened stomachs wondering how we are going to afford the food to fill it.

We can have another war after this one, and maybe things will be good for a while...but eventually there isn't going to be a war and things will start depressing and inflation will rise as the government stops printing money to try and get into balance again. Maybe we should find another way.

Is my reasoning flawed?

Oh...and by the way, if you'd care to buy this article I created, for $30, I'm sure something can be arranged.

Replies: 2 comments

Eventually there isn't going to be a war? You're one crazy cock-eyed optimist! Posted by Barbara @ 04/07/2003 06:54 PM PST