Monday, 02 July 2012 14:42

The Difference Between Money and Wealth and Why You Can Easily Print One But Must Actually Create The Other Featured

Many lay persons are misled by terms such as money printing. This misdirection is easily understood and stems from a basic misunderstanding of what money is, versus actual economic value. Let's assume we have a pie called the EU (or US?), with a 1 trillion euros of economic value. This is the European economic pie. The EU get's in trouble and the banks start to run out of money. Now, the fact of the matter is that those same banks failed to make incremental gains to their actual economic value (true profit) and everyone who's paying attention knows it, hence they faced a problem getting funding. So, they go crying to the central bank, who basically printed euros through various mechanisms in order to push new and additional little pieces of digital paper throughout the system. This is what the layperson sees as money appearing out of nowhere at the behest of the financial bailout gods of the governmental powers that be.

The problem with this viewpoint is that the money appeared out of nowhere, but said money was not backed by actual economic capital. Hence more euros (or dollars) are available in the system, but each of those euros/dollars are simply worth that much less.

This is not economic progress boys and girls. What we need to move forward is to bake bigger pies, not cut the existing and steadily shrinking economic pies into more pieces!!!

Economic pie 

Last modified on Tuesday, 03 July 2012 08:19 | This email address is being protected from spambots. You need JavaScript enabled to view it.


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