Tuesday, 15 May 2012

Money Is Not Wealth

Wealth is something which will make you understand the real meaning of it. It does not simultaneously relate with money by any means. Wealth was defined long time ago. It was there even when there was no money. It’s not only human beings who have wealth. Even animals are wealthy.

Wealth is the most important and a fundamental thing. It is a stuff we want: food, clothes, houses, cars, gadgets, travel to interesting places, and so on. Wealth can be achieved without being rich. Being rich does not mean you are wealthy. If you were in the middle of Antarctica, where there is nothing to buy, it wouldn't matter how much money you had.

Wealth is what people crave for and not money. Wealth is what you want, not money. But if wealth is the important thing, why does everyone talk about making money? It is a kind of shorthand: money is a way of moving wealth, and in practice they are usually interchangeable. But they are not the same thing, and unless you plan to get rich by counterfeiting, talking about making money can make it harder to understand how to make money.

How do you get the person who grows the potatoes to give you some? By giving him something he wants in return. But you can't get very far by trading things directly with the people who need them. If you make violins, and none of the local farmers wants one, how will you eat?

The solution societies find, as they get more specialized, is to make the trade into a two-step process. Instead of trading violins directly for potatoes, you trade violins for, say, silver, which you can then trade again for anything else you need. The intermediate stuff-- the medium of exchange-- can be anything that's rare and portable. Historically metals have been the most common, but recently we've been using a medium of exchange, called the dollar, that doesn't physically exist. It works as a medium of exchange, however, because its rarity is guaranteed by the U.S. Government.

The advantage of a medium of exchange is that it makes trade work. The disadvantage is that it tends to obscure what trade really means. People think that what a business does is make money. But money is just the intermediate stage-- just a shorthand-- for whatever people want. What most businesses really do is make wealth. They do something people want.

1 comment:

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