Archive for Finance

Where has all the money gone…..

Posted in Economy with tags , , , , , on August 19, 2010 by urbannight

Money is a finite item.  Governments print so much of it and destroy a certain amount each year.  People get paid, buy stuff, the spent money then either goes back into that business or it goes to shareholders, some gets spent, some gets saved.  As it goes farther up the chain of people, business, corporations, and investors, more of it gets tied up and less gets put back into the flow of money movement.

We act as if money is infinite.  Students are told that anyone who works hard can become well off and maybe even millionaires.  On one hand we are recommended to save money, on the other hand we are told that saving is hording and that the only way to keep the economy going is to spend spend spend.

Even governments are constantly spending money they don’t yet have.  And then recessions happen, stocks drop, people discover that the money they thought they had has shrunk drastically.  Sometimes it has vanished. 

And I think about scandals of the 1990’s give or take a few years.  When the average person starts hearing about shady accounting practices that make business appear to have more money than they really do.  They learn you can move numbers around to hide problems and debt.  We all learned about corporate asset shuffling on paper can change the entire picture. 

I wonder how many of these practices have gotten into the whole accounting process.  How many of them are actually taught as acceptable ways of manipulating numbers?  How many of them are accepted ways of accounting that the people doing them don’t even realize they are shady?

Which brings me to another thought:  Where has all the money gone?  You read article after article saying people who thought they had this amount really have that amount, a smaller amount. 

We count resale value of a home as money in the pocket.  But it really isn’t.  There are lots of things we do to increase our worth on paper but the reality is that those things are not real money.  It’s the idea of potential future money. But we operate as if it is already in the bank. 

So I have to ask a question.  Was there really as much money in the world as people thought?  Or has all this number shuffling and creative accounting made the world as a whole look richer than it really is and now it’s just caught up with us?

Roosevelt’s solution of the Depression was to build highways and link up the entire country.  This created actual jobs.  This helped people out at the lowest level and which in turned help local businesses and it spread upwards.

The current economic thought is that you help out the financial institutions, you help out big business, and it trickles down.  But if you don’t help out the people at the base of the totem pole of economics, it doesn’t matter how much you repaint and repair the top of the totem pole.  It will still fall over because it lacks a sound support.  The people whose actions fuel the economy through consumer spending still don’t have the money to spend.  All because there seems to be less of it in the world than before.

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