- Jan 19, 2010
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The Flawed Concept of "Wealth Redistribution"
M40 - Thursday February 26th, 2009, 6:29pm
Anyone who believes in "wealth redistribution" shows a complete and utter ignorance of how economics work. This applies at both the micro and macroeconomic scale. The fact that our president is a firm believer in wealth redistribution is a scary fact indeed. If you doubt this, listen to him talk about it here: [ame=http://www.youtube.com/watch?v=iivL4c_3pck]YouTube - Obama Bombshell Redistribution of Wealth Audio Uncovered[/ame]
The premise of "wealth redistribution" is that it is unfair when one person has more wealth than another. However, this whole assessment of fairness is based on a faulty principle. That principle is called "zero sum economics", and it is a flawed assumption. Zero sum economics assumes that there is a fixed amount of wealth in the world, and that we all have to share it. If someone takes more than their share, then someone else has less as a result. If that were the case, then "wealth redistribution" might be a means to remedy that inequity. However, nothing could be further from the truth. There is NOT a fixed pile of "wealth" from which we all must share. Wealth is created, not taken from others.
In the zero sum mindset, if I take an extra slice of pizza, then some unlucky asshole is left to gnaw on the box. There is no consideration for the fact that we can simply make another pizza, and have thus created "wealth". The pizza is worth 10 times what the raw ingredients were worth, and thus wealth is created from nothing. If you know someone who supports "wealth redistribution", ask them the following. Should artists be forced to sell paintings for the exact sum of the cost of the paint and canvas? The answer is (of course), no way! Well... where did that extra cost come from? It came from the artists skill, time and workmanship. The artist created a large amount of wealth from a couple dollars worth of materials.
But some folks might argue that there's a fixed amount of dollars, pounds, (pick any currency) out there and that is what we are forced to share. Again, a FLAWED perception of reality, and an ignorance of how economics and currencies work. What is a dollar worth? It's worth a dollar of course... but what the fuck does that mean? Here's the secret... it means whatever you want it to mean.
The dollar is a piece of paper that is sometimes worth a lot, and at other times isn't worth the paper it's printed on. The value of any currency is worth whatever people perceive it to be worth at that exact moment. It is only a "bearer instrument" used for trade and is based ENTIRELY on your trust in its value. If I'm selling bread, I might decide that my bread is worth a dollar per loaf. But the next day, I may decide it's worth two dollars a loaf. It's up to me what I charge, but it's also up to the BUYERS. If people decide that my bread tastes like ass, then suddenly my bread is worth precisely ZERO DOLLARS to me or anyone else. Therefore, the value of ANYTHING is... exactly what people are willing to spend on that thing!
If I have a Snickers bar and someone offers me a dollar for it SOLD. However, if I happen to be starving and the Snickers bar is the only food available, then that Snickers bar may be worth a hundred dollars it may be worth a thousand dollars or a million. The Snickers bar is the wealth, NOT the dollars. The dollars are only instruments used for trade, and like any trade, you as a buyer or seller need to weigh your perceived value of the item youre trading and that which youre trading it for.
Paper money and coinage were invented to make trade easier for people. Lets go back a few thousand years in history before money. The tribal toolmaker shows up at the butchers place. He offers the butcher a nice stone knife for a choice cut of mutton. Well, the butcher may already have all the stone knives he needs, so no deal. The toolmaker now needs to find out what the butcher needs, then find a person who has that and is willing to trade for stone tools! Why? No currency as a means of trade. But again, the currency is only valued based on what people are willing to pay. If there was starvation among the tribes people, then all the stone tools in the world arent worth a bite of mutton. Likewise, if the tribe has 27 butchers, but only one toolmaker, then decent stone blades are worth a LOT of meat.
Because there's a fixed amount of DOLLARS out there, the value of a dollar therefore rises and falls based entirely on public perceptions. If we as a nation are busy little bees and produce lots of goods and services that the world actually wants, then the value of the dollar skyrockets. If we sit back and get fat and lazy, the value of the dollar plummets like a stone.
So what if we simply make more dollars? Would we create wealth? HELL NO. Again... dollars do not equal wealth, they are merely the instruments used to trade wealth between people. Therefore, if Obama decides he'll print dollars like crazy to pay off the incredible debt he's saddled us with, then all he's doing is doubling the amount of dollars out there... but cutting their VALUE in half or worse. The actual amount of wealth hasn't changed just because he directs the mint to make more trade instruments.
Because of this, when governments don't understand basic economics, they make huge mistakes (like printing more money). Let's pretend you are a foolish little imbecile, and have your life savings (let's say $50,000) sitting in the bank. Obama decides tomorrow that it would be cool to simply print 10 trillion dollars in new bills and pay off all our debts. Your life savings would still amount to exactly $50,000. However, you might then need that $50,000 to buy a Big Mac combo meal.
At about this point, you might think I'm exaggerating. However, history is rife with economies that collapsed into rampant inflation because they were run by idiots who knew nothing about economics. As soon as people begin to lose confidence in a currency, that currency loses all its value. It may as well be a pile of paper.
Only our confidence keeps the system going. Its the confidence that if we trade something for dollars, that we can then trade those dollars for something else of value. As soon as we lose that confidence, we end up with $10,000 Snickers bars
M40 - Thursday February 26th, 2009, 6:29pm
Anyone who believes in "wealth redistribution" shows a complete and utter ignorance of how economics work. This applies at both the micro and macroeconomic scale. The fact that our president is a firm believer in wealth redistribution is a scary fact indeed. If you doubt this, listen to him talk about it here: [ame=http://www.youtube.com/watch?v=iivL4c_3pck]YouTube - Obama Bombshell Redistribution of Wealth Audio Uncovered[/ame]
The premise of "wealth redistribution" is that it is unfair when one person has more wealth than another. However, this whole assessment of fairness is based on a faulty principle. That principle is called "zero sum economics", and it is a flawed assumption. Zero sum economics assumes that there is a fixed amount of wealth in the world, and that we all have to share it. If someone takes more than their share, then someone else has less as a result. If that were the case, then "wealth redistribution" might be a means to remedy that inequity. However, nothing could be further from the truth. There is NOT a fixed pile of "wealth" from which we all must share. Wealth is created, not taken from others.
In the zero sum mindset, if I take an extra slice of pizza, then some unlucky asshole is left to gnaw on the box. There is no consideration for the fact that we can simply make another pizza, and have thus created "wealth". The pizza is worth 10 times what the raw ingredients were worth, and thus wealth is created from nothing. If you know someone who supports "wealth redistribution", ask them the following. Should artists be forced to sell paintings for the exact sum of the cost of the paint and canvas? The answer is (of course), no way! Well... where did that extra cost come from? It came from the artists skill, time and workmanship. The artist created a large amount of wealth from a couple dollars worth of materials.
But some folks might argue that there's a fixed amount of dollars, pounds, (pick any currency) out there and that is what we are forced to share. Again, a FLAWED perception of reality, and an ignorance of how economics and currencies work. What is a dollar worth? It's worth a dollar of course... but what the fuck does that mean? Here's the secret... it means whatever you want it to mean.
The dollar is a piece of paper that is sometimes worth a lot, and at other times isn't worth the paper it's printed on. The value of any currency is worth whatever people perceive it to be worth at that exact moment. It is only a "bearer instrument" used for trade and is based ENTIRELY on your trust in its value. If I'm selling bread, I might decide that my bread is worth a dollar per loaf. But the next day, I may decide it's worth two dollars a loaf. It's up to me what I charge, but it's also up to the BUYERS. If people decide that my bread tastes like ass, then suddenly my bread is worth precisely ZERO DOLLARS to me or anyone else. Therefore, the value of ANYTHING is... exactly what people are willing to spend on that thing!
If I have a Snickers bar and someone offers me a dollar for it SOLD. However, if I happen to be starving and the Snickers bar is the only food available, then that Snickers bar may be worth a hundred dollars it may be worth a thousand dollars or a million. The Snickers bar is the wealth, NOT the dollars. The dollars are only instruments used for trade, and like any trade, you as a buyer or seller need to weigh your perceived value of the item youre trading and that which youre trading it for.
Paper money and coinage were invented to make trade easier for people. Lets go back a few thousand years in history before money. The tribal toolmaker shows up at the butchers place. He offers the butcher a nice stone knife for a choice cut of mutton. Well, the butcher may already have all the stone knives he needs, so no deal. The toolmaker now needs to find out what the butcher needs, then find a person who has that and is willing to trade for stone tools! Why? No currency as a means of trade. But again, the currency is only valued based on what people are willing to pay. If there was starvation among the tribes people, then all the stone tools in the world arent worth a bite of mutton. Likewise, if the tribe has 27 butchers, but only one toolmaker, then decent stone blades are worth a LOT of meat.
Because there's a fixed amount of DOLLARS out there, the value of a dollar therefore rises and falls based entirely on public perceptions. If we as a nation are busy little bees and produce lots of goods and services that the world actually wants, then the value of the dollar skyrockets. If we sit back and get fat and lazy, the value of the dollar plummets like a stone.
So what if we simply make more dollars? Would we create wealth? HELL NO. Again... dollars do not equal wealth, they are merely the instruments used to trade wealth between people. Therefore, if Obama decides he'll print dollars like crazy to pay off the incredible debt he's saddled us with, then all he's doing is doubling the amount of dollars out there... but cutting their VALUE in half or worse. The actual amount of wealth hasn't changed just because he directs the mint to make more trade instruments.
Because of this, when governments don't understand basic economics, they make huge mistakes (like printing more money). Let's pretend you are a foolish little imbecile, and have your life savings (let's say $50,000) sitting in the bank. Obama decides tomorrow that it would be cool to simply print 10 trillion dollars in new bills and pay off all our debts. Your life savings would still amount to exactly $50,000. However, you might then need that $50,000 to buy a Big Mac combo meal.
At about this point, you might think I'm exaggerating. However, history is rife with economies that collapsed into rampant inflation because they were run by idiots who knew nothing about economics. As soon as people begin to lose confidence in a currency, that currency loses all its value. It may as well be a pile of paper.
Only our confidence keeps the system going. Its the confidence that if we trade something for dollars, that we can then trade those dollars for something else of value. As soon as we lose that confidence, we end up with $10,000 Snickers bars
