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Economics 101: Wealth and Money

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  • Economics 101: Wealth and Money

    Economics in it's many forms pops-up on these forums~threads often, in it's wake come the concepts of Wealth and Money which are often used inter-chanagably, though they differ significantly.

    This thread will start out as an examination of some basics here, but I expect it may wander off into other tangents as is usual.

    BTW, it Admin/Mods deem another sub-forum is better suited, so be it ...

  • #2
    Wealth Creation: (HE x T) + NR = W

    The following is a concept/formula I came across a few decades ago, so can't claim authorship, but it's basic fundamental resonated.

    Human Energy times Tools plus Natural Resources Equals Wealth.

    If you want a formula (oh gawd, here comes algebra) it would be;

    (HE x T) + NR = W

    HE - Human Energy is basically people doing things to provide necessities and/or luxuries of living.

    T - Tools range from Knowledge~Skills~Craftsmanship to needed implements; picks/shovels/axes/plows up to factories with machinery and transportation systems, etc.

    NR - Natural Resources can be the soil~with fertilizer, water, and carbon dioxide where one plants and grows crops for food and material to the mineral and metal ores extracted from the Earth's surface, etc.

    WEALTH
    is Goods and/or Services that have Market Value.

    Market Value means others are willing to exchange their goods/services for the goods/services you produce.

    MONEY
    is one of those "Tools" which provides two main concepts;
    1) A means by which we can measure Wealth, assign Values.
    2) A device to circumvent the cumbersome process of barter, thereby facilitating the more efficient exchange of Goods and Services (in the Market Place).

    Technically Money is not Wealth, but many tend to confuse the two and often apply interchangeably. Not very accurate and tends to confuse dialogue on either topic.

    Comment


    • #3
      I would prefer to go with the basic accounting equation:

      Assets-Liabilites= Equity (or capital)

      Of course, one should know how to classify things! I assume money held in a business safe box is considered a form of "asset"

      The real business wealth for a company's owners is measured through the "equity" indicator. If they have a lot of assets but even bigger liabilities, then they are in big trouble regardless of how much money they have in the company's safe box...
      I also assume that wages will be classified under liabilities while the salary of a business owner will be simply deducted from the assets. So, basically the business assets (and equity) is decreasing while the personal wealth of the owner is increasing by the same amount. Basically, "business wealth" becomes "personal wealth," so it is taken out of the business accounting books...

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      • #4
        The thing I find interesting is the disconnect between utility and value. What use is a diamond or a football player? Certainly rarity plays a role but that does not explain pet rocks. You can't say that money is an abstraction and wealth is tangible either because useless things can be converted into tangible assets that have utility.

        Comment


        • #5
          Originally posted by pamak View Post
          I would prefer to go with the basic accounting equation:

          Assets-Liabilites= Equity (or capital)

          Of course, one should know how to classify things! I assume money held in a business safe box is considered a form of "asset"

          The real business wealth for a company's owners is measured through the "equity" indicator. If they have a lot of assets but even bigger liabilities, then they are in big trouble regardless of how much money they have in the company's safe box...
          I also assume that wages will be classified under liabilities while the salary of a business owner will be simply deducted from the assets. So, basically the business assets (and equity) is decreasing while the personal wealth of the owner is increasing by the same amount. Basically, "business wealth" becomes "personal wealth," so it is taken out of the business accounting books...
          Wages are an expense, not a liability, and are only deducted from assets when they're paid. If an owner reduces his equity by taking an inordinately large wage then he serves only to hurt himself, since he'll have to pay income tax on his wage, while he'll only pay a capital gain tax on the growth of his equity position at the time when the gain is realized, ie when he sells it.

          Originally posted by wolfhnd View Post
          The thing I find interesting is the disconnect between utility and value. What use is a diamond or a football player? Certainly rarity plays a role but that does not explain pet rocks. You can't say that money is an abstraction and wealth is tangible either because useless things can be converted into tangible assets that have utility.
          That's the beauty of economics: value and utility are relative. They reside in the eye of the beholder. In a modern mass-consumption economy such as ours, the real issue isn't so much in the manufacture or distribution of the product, but in its marketing. If you can get people to believe that your product is worth it, then you've really made it.
          Last edited by slick_miester; 12 Sep 17, 15:41.
          I was married for two ******* years! Hell would be like Club Med! - Sam Kinison

          Comment


          • #6
            I have a comparison chart for a # of my recent uber riders. Uber is basically like a Taxi service. Anyway the first example is a millionaire wealthy couple(both in their 50s) whom I took on a 28+ mile ride..the couple tipped me nothing.

            There was a 18 year old cook from Dennys making min wage and I took him on a 4 mile ride home and he tipped me 6$.

            Last night I picked up a guy whom was with either his wife, hooker, or gf..and this guy was a real hoot a great guy, probably also a millionaire as he had a great house...the last guy tipped me 20$ on a 6 mile trip. Point here is its the last guy and the Dennys cook that make America great.

            I talked with some of my older friends whom are my neighbors, the one guy basically said yay I hear you its the blue collard Americans who keep the country running. He talked about how rich Americans were not tipping anything on a vacation he went to in the Caribbeans but the middle class folks were tipping 1$ or so to the local waiters of course American money brings a huge smile to these Island people. But then again there was the rich guy I picked up on Sun night who was cool and also a great guy who provided me a nice tip. Btw I have only been doing this Uber thing for a few days and its been interesting.


            Now I will say Uber/Lyft is not tip mandatory compared to waiting for example. I have not and will not ask riders for tips but apparently some drivers put up signs in their cars asking for tips I find this to be unnecessary and it could pressure the rider. What I will say though is that when I have rode Uber myself I have AFAIK always tipped the driver at least 1$. We all have different takes on tipping and economics, I submit that when it comes to taxis and Uber driving I tip a dollar or maybe two on a fare under ten bucks.
            Last edited by Stonewall_Jack; 12 Sep 17, 20:41.
            Long live the Lionheart! Please watch this video
            https://www.youtube.com/watch?time_c...&v=jRDwlR4zbEM
            https://www.youtube.com/watch?v=f3DBaY0RsxU
            Accept the challenges so that you can feel the exhilaration of victory.

            George S Patton

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            • #7
              Im reminded of this btw,

              Long live the Lionheart! Please watch this video
              https://www.youtube.com/watch?time_c...&v=jRDwlR4zbEM
              https://www.youtube.com/watch?v=f3DBaY0RsxU
              Accept the challenges so that you can feel the exhilaration of victory.

              George S Patton

              Comment


              • #8
                Originally posted by Stonewall_Jack View Post
                Im reminded of this btw,

                There has always been a certain proportion of The Rich in particular who are total, utter, complete, aholes to everyone around them just because they can be. Leona Helmsley comes to mind...

                Comment


                • #9
                  Originally posted by T. A. Gardner View Post
                  There has always been a certain proportion of The Rich in particular who are total, utter, complete, aholes to everyone around them just because they can be.
                  The same can be said for any group. The ******* gene does not discriminate.

                  Back on topic;

                  Wealth describes assets.

                  Money is one measure of wealth and one form of asset. It is a liquid asset. You can be wealthy but have a low income because you choose to hold your wealth in a form which is not liquid, for example someone who owns a very expensive family home but has no job.
                  "The thing about quotes on the internet is that you cannot confirm their
                  validity." - Abraham Lincoln.
                  "Nothing's going to change while one side it lying about the cause and the other is lying about the solution" - Me

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                  • #10
                    Originally posted by T. A. Gardner View Post
                    There has always been a certain proportion of The Rich in particular who are total, utter, complete, aholes to everyone around them just because they can be. Leona Helmsley comes to mind...

                    Good point, she was an obstacle to American success.
                    Long live the Lionheart! Please watch this video
                    https://www.youtube.com/watch?time_c...&v=jRDwlR4zbEM
                    https://www.youtube.com/watch?v=f3DBaY0RsxU
                    Accept the challenges so that you can feel the exhilaration of victory.

                    George S Patton

                    Comment


                    • #11
                      Originally posted by E.D. Morel View Post
                      Back on topic;
                      All of the posts itt so far have been on topic. And it could be that the middle class tips better then any economic group in the world, we would need to see some studies but it would be interesting.
                      Long live the Lionheart! Please watch this video
                      https://www.youtube.com/watch?time_c...&v=jRDwlR4zbEM
                      https://www.youtube.com/watch?v=f3DBaY0RsxU
                      Accept the challenges so that you can feel the exhilaration of victory.

                      George S Patton

                      Comment


                      • #12
                        Originally posted by G David Bock View Post
                        MONEY is one of those "Tools" which provides two main concepts;
                        1) A means by which we can measure Wealth, assign Values.
                        2) A device to circumvent the cumbersome process of barter, thereby facilitating the more efficient exchange of Goods and Services (in the Market Place).

                        Technically Money is not Wealth, but many tend to confuse the two and often apply interchangeably. Not very accurate and tends to confuse dialogue on either topic.
                        Banks actually used to print their own money, as a measure of the client's wealth on deposit in the vault.
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                        • #13
                          Originally posted by G David Bock View Post
                          ....

                          WEALTH[/B] is Goods and/or Services that have Market Value.

                          Market Value means others are willing to exchange their goods/services for the goods/services you produce.

                          MONEY
                          is one of those "Tools" which provides two main concepts;
                          1) A means by which we can measure Wealth, assign Values.
                          2) A device to circumvent the cumbersome process of barter, thereby facilitating the more efficient exchange of Goods and Services (in the Market Place).

                          Technically Money is not Wealth, but many tend to confuse the two and often apply interchangeably. Not very accurate and tends to confuse dialogue on either topic.
                          Very good, I like that whole post.
                          And if Money were not a tool with a subjective aspect to it, there wouldn't be inflation and an ever-shifting exchange rate.
                          Coins were made of metals with a known value until about a century ago (until 55 years ago in the US) for a reason; to limit the degree to which money fluctuated in value. Now that it is entirely a fiat system, it is a system that inspires confidence in inverse proportion to the education level of the population in question.

                          Credit is a two-edged sword, as is the fiat system itself. The drawbacks have already been talked to death here, but without credit and fractional backing there just isn't enough currency to create serious growth in an economy.
                          Maybe someday, somebody will come up with a system of credit that isn't a time-bomb, something that can be sustained without ever-increasing amounts of debt... someday.
                          "Why is the Rum gone?"

                          -Captain Jack

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                          • #14
                            So... 2016 was a good year for the middle class.

                            https://www.washingtonpost.com/busin...=.746c3ceb8574

                            Thanks Obama.

                            Comment


                            • #15
                              Originally posted by Paddybhoy View Post
                              So... 2016 was a good year for the middle class.

                              https://www.washingtonpost.com/busin...=.746c3ceb8574

                              Thanks Obama.
                              In spite of Obama, whose record is more of wealth taker than wealth maker. From your article link ...

                              " Middle-class households are only now seeing their income eclipse 1999 levels.

                              Inequality remains high, with the top fifth of earners taking home more than half of all overall income, a record. And yawning racial disparities remain, with the median African American household earning only $39,490, compared with more than $65,000 for whites and over $81,000 for Asians.
                              Economists and policy experts wonder whether the gains will continue.

                              The median income had surged since 2014 because millions more
                              Americans found full-time jobs, but there is little evidence that employers are rushing to offer raises to those who already are employed. Without more wage gains, momentum could slow. "

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