Friday, May 25, 2012

Money is not Wealth

Money and Wealth

Wealth is stuff. Wealth is genuine value, it is something you can use. It is the car in your driveway, the knowledge in your head, the clothes on your back, and a factory that can make these things. To make more wealth takes tremendous effort. As a nation we improved our wealth stock in the lead up to WWII, and we destroyed plenty of wealth in the war itself, but neither of these events were easy. 2008 did not see much destruction of wealth, and yet suddenly everybody got poor. This is because suddenly there wasn’t enough money.

See, money isn’t wealth. Money is paper with dead presidents on it, and numbers in an account. Money is easily exchangeable for wealth (I can go to the store with a $100 bill and get a big bundle of real stuff in return), but at the end of the day, my money is neither food, nor shelter, nor entertainment. What money does for us is lubricate the economy. Money is what lets us buy and sell, it is a useful intermediary for us to use to exchange wealth, and right now we don’t have enough. The recession didn’t make the factories we had, the knowledge we had, or the cars we had, any less good. These things did not lose any value: the average worker did not suddenly become dumber or less useful. What the average worker suddenly did not have was money. Because suddenly people had less money, the lubricant of the economy dried up, and just like an unlubricated engine, it seized up.

More specifically, the money did not go away, but like in an engine with a broken oil pump, the money ceased to be where it needed to be, and instead congregated in the banks, languishing in the metaphorical oil pan rather than being distributed among the moving parts of the economy. As long as there is insufficient money among the moving parts (you and me, to be specific), the motor will run haltingly, and people will continue to want for money, but more importantly, they will want for real wealth, living in apartments that are too small, driving cars that are too old, and in the worst cases, going hungry.

The important thing here is that people are going hungry not because we do not have enough food, farms, and factories, but because of a shortage of money, which we can print as easily as we like, on demand. People going hungry for want of wealth is sad, but people going hungry for want of money is a tragedy of epic proportions, because it is one that we could fix tomorrow, simply by printing a stack of $100 bills and mailing them to each citizen.

Maybe somebody ought to think about doing something.

No comments:

Post a Comment