brotherpeacemaker

It's about our community and our spirituality!

Trillions Of Dollars Didn’t Just Evaporate

dollars rain

The other day I was sitting at my desk overhearing a conversation between a couple of coworkers.  One person was making a comment about being thankful that he didn’t own any General Motors stock.  The other coworker started getting philosophical.  He said that over the past few weeks, months even, trillions and trillions of dollars have evaporated from the economy.  Where did all that money go?  It wasn’t destroyed.  Nobody took it out into the backyard and set fire to it.  Where did all that money evaporate to and what do we have to do to condense it back?

I thought about what the guy was saying and my immediate thought that I kept to myself was, what makes you think that the trillions of dollars were there in the first place?  The evolution of currency has gotten to a point that we actually value something that doesn’t even exist.

The natural way of exchanging value is the barter system.  I trade something of value to you and you trade something of equal value to me.  If I raised chickens I might trade a few to the guy that grows wheat or the woman that makes clothing depending on what my needs were.  Not quite a convenient way of exchange.  How many people would be willing to walk around with a few chickens in their pocket?  But I could exchange my chickens for gold coins or silver or something else of value and use that valuable metal to buy whatever I wanted whenever I wanted.

But while coins may be better than carrying chickens it isn’t really all that convenient because it weighs a ton.  So instead of carrying around metal to exchange for goods I could carry around a piece of paper that said I had access to X amount of whatever precious metal.  Paper money is even more convenient.  But paper money tied to only so much gold and silver is rather limited.  In order to create more wealth, one would have to drive up the price of precious metal or find some more.  Not all that convenient.

Take that paper money off of the gold standard and tying it to something of intangible value, like the gross domestic product of an entire country’s worth, and the sky can literally become the limit.  Now, the government can print money and create value where none existed before.  A house that used to sell for twenty thousand dollars a few decades ago is now worth a million dollars because there’s so much printed money floating around that really has no value other than what somebody somewhere says it does.

If I drew a doodle on a napkin and tried to sell it on ebay as a Brother Peacemaker original I would be surprised if I got fifty cents for it.  But the other day I heard that a doodle from the President-elect sold for six figures.  Why?  Obviously somebody felt that it had that much value that they were willing to pay six figures for it.  But what is that doodled napkin really worth?  Somebody might say that the soon to be President created wealth with his impromptu artwork.  But a few minutes of chicken scratch, it wasn’t all that great at all, does not make for collectible art status unless a buyer and a seller agrees that it does.

By printing money and giving everybody so much of it to spend, our government has given people the impression that our purchasing power is constantly growing and getting stronger when nothing could be further from the truth.  The average annual income back in the day was a few thousand dollars. Now, the average annual income is a factor of twenty over that. Not a problem! Just inflate the cost of everything. Need a raise? Not a problem! Here’s a two percent raise while the cost of living goes up forty percent!

And the economy is bringing this fact into tangible terms right before our very eyes.  House prices, like so many goods recently, have been reevaluated and put in their proper perspective.  Some people have been slapped awake by the sudden realization of their true worth in the marketplace.  The value that they thought they had in their home, in their job, in their savings, in their investments, etcetera, turned out to be little more than a sophisticated scam of bait and switch.

Trillions of dollars haven’t evaporated.  They were never there in the first place.  The only thing we have to say how much we are worth sits on a giant database on a giant computer somewhere.  It is nothing but a series of numbers represented by bits and bytes on a magnetic disk platter.  There is nothing tangible about it.  And when the computer says the house you bought yesterday for X amount of dollars is only worth half of X you have no choice but to sit back and obey when someone tells you that your worth has evaporated.  But in all honesty you were never worth all that in the first place.

Monday, December 1, 2008 - Posted by | Capitalism, Economy, Life, The Economy, Thoughts

2 Comments »

  1. Thanks for a clear and concise explanation of this ponzi scheme.

    Comment by Jazzy | Monday, December 1, 2008 | Reply

  2. This is funny because I was having this same talk with my boy on Sunday–saying the same exact thing. Money is more like a memento, it’s supposed to capture the value of something at a specific time. The only thing that is worth something, is something that holds value. And as you said money is worthless, and further, money isn’t real.

    Comment by Jamel Toms | Tuesday, December 2, 2008 | Reply


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: