Magic money

Capitalism

Consumerism is akin to a fisherman dangling a tempting delight to snare the hungry. If you can’t force people to buy your product and there is little in the way of government support to buy your output, you need to induce people to buy your wares. You can make people feel left out if they don’t buy certain things. If you make your products or services fashionable, you entice the gullible. Even better use the third person, preferably a famous individual to make people want to aspire to those that appear admirable and ‘happening’.

Capitalism can be confused with financial engineering. Trading a financial product is not the same as using money to increase productivity. You may invest in a machine that will speed up your work. This can increase your sales or reduce your costs. The increase in profits cover the cost of the finance involved in purchasing it. Another elementary example of good capitalism is to lend to a market trader. With the extra funds, they can buy more stock. The more stock they have the more they will sell each day.

The main point of this good capitalism is that people get the original money back and make some extra as well. Bad capitalism is where one provides the means for someone to obtain a new sofa. The added interest will mean they pay a whole lot more for it, which is bad enough. Worse still after a few years of lounging on it, it will end up being dumped. Both the interest and the cost of the sofa is never recouped. The person begins to spend their future earnings and is kept much poorer as a result. Lending is good for all people concerned if and only if there is profit potential. After all, an old person for example may not be able to work anymore but can earn a little by lending to those that can. Profiting from lending is not bad as it is the ultimate in cooperation as all parties can gain. Capitalism is sweet when used to increase profitability rather than profligacy.

Selling fresh air to one another is not capitalism. Turning a piece of metal into a fork adds value to the metal. Branding the spoon ‘super deluxe spoon by Sir Stewart’ gives it a certificate of trust and thus can be sold for more. People will pay more per item for a small quantity – distribution, wholesale to retail. These are essential elements of an economy. When you sell a duff financial instrument to the unwary you are not creating economic value. Someone gains 10 at the expense of someone losing 10.

Imagine you are sitting around a camp fire and one bright spark has a great idea. Let’s make a set of bellows to blow lots of air into the fire. It will burn much better. When they try it, it works, and the fire gets a lot hotter. They fall asleep and die of hypothermia. Why, because the wood burns much quicker. The only way to have more sustainable heat is to go into the woods, cut, chop, and fetch some more wood. A government can go into the bank and change the money in their account from 50 to 500 by adding a zero. They have made money. This will act like blowing air on the fire and the economy will heat up somewhat. However, a farmer may have 50 pigs in their sty, but can’t turn them into 500 by adding a zero. Wealth is created when we grow something. Mine something. When we transform something; metal into cutlery.