Tuesday, January 15, 2013

How Money Works Part III: Rich and Poor

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Poverty Is Stupid

In this series, what do we know so far?

  • Money is nothing more or less than a container for Value;
  • Value is placed on anything that people (or any living organism for that matter) needs or wants for itself;
  • Ownership of value is a natural and fundamental property of Life;
  • Every willing exchange of value creates more value and hence increases wealth.

Many struggle with the idea of Money because some people seem to have it and other people don't.  It doesn't seem fair.  We see misery and suffering and assume that it's somehow the money's fault. Numerous solutions to the problems of happiness and poverty have been proposed, but most take the unreasonable and illogical approach of focusing on re-arranging the money.  This is ridiculous because, as Douglas Adams so insightfully puts it, for the most part it is not the money that is particularly unhappy.

Poverty is a serious problem, and as we now know, problems are stupid because most of them have already been solved.  Anyone who clings to his problems and ignores the perfectly well-known solutions out there does so because he is unconsciously in love with his problem while vehemently denying that this is the case.  A problem-haver will fiercely defend and justify his problem to anyone who will listen, particularly if they challenge him on it.

That is why I say poverty is stupid.  It is a problem which has already been solved countless times over.  As soon as someone really understands how money works, decides to stop loving problems and commits to giving up poverty and all its stupid little ways, it is impossible for them to remain poor.  Yet there are two main reasons why people are poor.  But before we discuss them, we have to pause for a moment and define poverty.  To do so we must extend our understanding of how money works to take into account the passage of time.

There are countless ways that people can create value for themselves and for others, and countless more ways of increasing that value by engaging in commerce and trade to deliver the ideal value to the ideal person at the perfect time.  As in the example of the fish and the egg, the person who needs an egg gets an egg, and the person who needs a fish gets a fish.  Value is always increased through a willing exchange.

But what happens when the fish and the egg have been eaten?  Does not the value disappear forever?  Of course not.  For one thing, at the very least the value enters the body of the consumer and is potentially converted into labor or other value-producing activity.  If food is not eaten but becomes spoiled, the possessor still experienced the value and security of at least having had the food available. Stock options eventually expire too, but that does not mean they were not worth having.

And still, the value has not been entirely destroyed,  In fact, it may have even increased.  Here's how.

The value we consume (figuratively or literally) allows us to live and survive.  A day's worth of food, shelter, clothing, security, etc. allows us to live for another day.  Now tell me this:  What is the value of one day of your life?

Whatever you consumed yesterday that enabled you to live till today, you just might consider it, upon sober reflection, to be the absolute bargain of a lifetime.  Talk about increasing value in a willing exchange! You exchanged a few hours of stored labor, a couple of paltry coins' worth of bread, for an entire day of life.  Irreplaceable, priceless life.  It's an incredible increase of value and wealth, and one that makes every living human already rich beyond belief.

If you were lucky enough to stay alive yesterday, then today you have a whole new day's worth of value-creating power, including but not limited to labor and commerce, with which to negotiate another day's worth of life.  If you were able yesterday to store more of your labor than you consumed to stay alive, then you  increased your negotiable wealth by even more than one day's worth.    That additional stored value gives you even greater ability to negotiate and create more value, and if carried on in this manner more or less consistently, it gets easier and easier to create enough value to live on every day.  You become what we will call Wealthy.

Wealthy is fantastic, because it can extend your life in the event of "hard times" in which creating value in the accustomed ways becomes difficult.  You and your family can live off your stored value until things return to "normal" or until normal becomes re-defined.

Wealth also enables you to support others to become self-sufficient and produce not merely enough value to live on themselves, but enough to support others still.

But when people perpetually have to fall back on each day's labor to survive, and often at a not very abundant level, then we say that they are "poor."  They are living poorly.

I define poverty as people who are dying.  Winding down, losing steam, not keeping up with life.  Benjamin Franklin said, "Poverty quickly overtakes the man who rises late or moves slowly." For decades researchers have been puzzling over why poverty is the one of the biggest risk factors for every major disease.  Also, they notice that the lower one's income, the lower a person's average life expectancy.  This comes as absolutely no surprise to anyone who understands what money really is and how it works.

I said at the beginning that there are two main reasons why people might be poor, and now that we have defined poverty, here they are.  But I should also clarify that I am talking about able-bodied people, and not those individuals who must inevitably be supported by family members or by the community due to age or disability.

Reason A.  Mismanagement of a person's daily value, whether labor, stored labor (cash), goods or property.  This falls into two categories: the poor-by-choice and the poor-by-ignorance.  Mismanagement includes undervaluing one's own time and labor, causing one to either voluntarily or ignorantly exchange their time and labor for not enough to live on.  It also includes ill-considered exchanges where the value of items for which one's labor was exchanged are grossly exaggerated.  Therefore anyone who voluntarily gambles, smokes, does drugs, drinks to excess, over-eats or wastes their money in any number of other ways MAY NOT EVER complain to me about being poor.  They are being poor (i.e. dying) by choice, and they love it.  Only the ignorantly poor are allowed to complain, but as soon as they are informed how to manage their wealth, complainy time is over, baby.  At that point, they can either implement the solution or voluntarily remain poor.

Reason 2.  Artificial distortions of the Laws of Money.  Sometime a society gets so f*&#ed up and out of touch with Life that they attempt to re-write the natural laws of life and wealth.  One example is when the concept of Ownership is interfered with, and individuals' wealth is forcibly and institutionally removed from their control.  Excessive taxation, forfeiture of assets, serfdom, slavery, rampant crime and communism are examples of attempts to artificially re-define the meaning of ownership.  This forces people into poverty because they cannot with any certainty store the value that they create.  When that happens, creating value never gets any easier and people can do little more than survive day by day while Death gradually overtakes them.

Another common example is the attempt to meddle with or control willing exchanges.  A willing exchange always creates value, but when an exchange is either forced or the price point is artificially manipulated, value gets lost and people become poorer with each exchange.  A prime example of this was in the 70's when the populist Nixon attempted to order a hold on the spiraling price of gasoline, thinking that this would finally make people like him.  What happened?  People stopped selling gasoline, or sold as little of it as they could get away with, because each sale at the artificial price point was making them poorer.  This resulted in long queues at filling stations and people hated Tricky Dicky even more than before.  Most attempts to artificially fix prices, dictate to the labor market or require certain exchanges by decree result in value being lost to society.  When people are forced to make an exchange which is of no value to them, value is destroyed.

Fortunately, these attempts to work against the laws of wealth tend to blow up after a while and the natural laws eventually re-assert themselves.  In the long run a nation has no more success in attempting to distort the natural economy of life than they would in repealing the law of gravity.  But if you find yourself in a Reason 2 poverty situation, what can you personally do about it?

Many people in that situation do whatever they can to undermine and circumvent the system.  The so-called Black Market for example.  Other people confront the system directly and try to change it through political or military action or in some cases comedy.  Still others learn the system's hidden rules and play along to the best of their ability.  Another option is to attain a higher level of consciousness above the plane of suffering and problems, to live entirely in the moment and thoroughly enjoy every day of life as the wealth beyond measure that it actually is while anticipating the inevitable end of life with complete and perfect serenity.

So there are many options. The old and popular refrain that some people have no choice but to be poor is therefore clearly nonsense.  And one must always question the assumption that the "system" is entirely responsible. It is the oldest and most worn-out excuse used to justify and defend Reason A poverty.  Where there are poor people living (more or less) next door to rich people, is it really the system that is at fault?  Or is it the individual conditioned mind that is causing poverty?  If anyone can be rich, everyone can be rich.

Poverty is not the natural state of life. One way or another it is the result of the improperly-conditioned mind of individuals and of the collective insanity of nations living at too great a remove from life, which is ultimately the Divine.  Poverty really is stupid, and God really does want you to kick the habit and be rich instead.

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