Friday, April 18, 2014

Wealth

Another one of the people who gets it consistently right is Marc Faber.  He is quoted here saying...
But according to Faber, consumption doesn’t create a strong economy. ‘Wealth doesn’t come from consumerism, it comes from capital spending,‘ he said.
Well, yes... but to clarify...  capital spending is on capital goods, the jet airliner, the pizza oven, the lawnmower.  Wealth is not the capital good, but what it produces: movement of someone from San Francisco to Shanghai, a pizza, a cut lawn.  Without small business both using up excess production and calling into creation new capital equipement, the economy is all about ripping people off.  That is what we have today, a largely false economy, risible balance sheets, massive misallocation and malinvestment where capital equipment does exist.

The process to achieve this unbalance is called usury, and I guess I will remain the only person pointing this out.  No, although the evil is great, I don't think it should be ooutlawed, because I don't think the state should exist, let alone outlaw anything.  If we in business simply do not recognize loans as anything more than a charitable event, and interest as somethign nonbinding, like a gambling debt, then usury will die.

Faber also knows words, so when he says consumerism, he is speaking in contradistinction to materialism.  USA is consumeristic, while Europe is materialistic.  This is why we have thrift stores and Europe generally does not.  We buy a sweater thinking it is for a season, in Europe they tend to think of a sweater as a long term investment.

Wealth is the array of goods and services which are available to people with their own money.  The more people can afford with their own money, the wealthier the society.  Achieving this can only be through a free market. I do understand that some people think wealth is to what degree few can claim much.  But neither etymology nor common sense is on their side.

And then Faber notes -
China’s massive growth triggered massive commodity export booms in emerging economies. China’s real success was exporting the products it produced back to emerging economies. This has created a significant shift in the global economy: exports from China to emerging countries are higher than exports to the US or Europe.
Just so. As our access to goods and services with our own money dwindles, the rest of the world is emerging under China's aegis, since China offers a better deal than USA to emerging economies.  Privatize the profits, socialize the costs, if it's new tax it, if it keeps moving regulate it, when it stops moving subsidize is.

The most revolutionary act you can make is start a business.

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