How is wealth created?

Loughton_Monkey

Who's a clever boy?

PasturesNew

You've missed the point. Paint the house magnolia (£10), sell it for double what you paid for it, share that out between the four of you. Each put that money down as a deposit on a BTL and all go live in a caravan.

Instant wealth.

HAMISH_MCTAVISH

chippy_250 wrote: »

May sound a stupid question but how is wealth created?

That depends what you mean by wealth. It's a highly subjective term with many interpretations, but the most accurate is probably the total of human productivity.

So wealth can only be created through productive endeavour.

Of course, to become wealthy in the traditional sense (ie, rich) does not require wealth creation in the strictest sense of the word, it can also be done through wealth accumulation.

If you mean money, then the answer is simpler....

So in real life, is money actually gained or just transfered/exchanged?

Both.

The first thing to understand is what money is. It's not wealth, it's a constantly depreciating token of exchange for productivity (which is wealth).

The second thing to understand, (and the one that is hardest for most people to grasp) is that we don't live in a static system.

The supply of money grows (primarily through debt based money creation in the fractional reserve banking system, but also through central bank interventions), and inflation reduces the value over time of individual monetary units (by design, to prevent unproductive hoarding).

So merely accumulating money is no guarantee of wealth, the inflationary system is specifically designed to ensure that hoarding money (without putting that money to work) results in devaluation.

After accumulating money, you have to put that money to work in order for it not to devalue. That productivity then creates more wealth.

So what creates wealth is productivity. And you can accumulate wealth by taking it from other people. But you can only maintain that wealth by redeploying what you've accumulated into a productive enterprise.

Orpheo

suicidebob wrote: »

You must be proud of yourself!

Remain ignorant.

1984ReturnsForReal_2

Cleaver wrote: »

I don't really agree with this, as I think it's a bit of an outdated view.

I know what you mean. It should also say Gaming

Orpheo

HAMISH_MCTAVISH wrote: »

That depends what you mean by wealth. It's a highly subjective term with many interpretations, but the most accurate is probably the total of human productivity.

So wealth can only be created through productive endeavour.

Of course, to become wealthy in the traditional sense (ie, rich) does not require wealth creation in the strictest sense of the word, it can also be done through wealth accumulation.

If you mean money, then the answer is simpler....



Both.

The first thing to understand is what money is. It's not wealth, it's a constantly depreciating token of exchange for productivity (which is wealth).

The second thing to understand, (and the one that is hardest for most people to grasp) is that we don't live in a static system.

The supply of money grows (primarily through debt based money creation in the fractional reserve banking system, but also through central bank interventions), and inflation reduces the value over time of individual monetary units (by design, to prevent unproductive hoarding).

So merely accumulating money is no guarantee of wealth, the inflationary system is specifically designed to ensure that hoarding money (without putting that money to work) results in devaluation.

After accumulating money, you have to put that money to work in order for it not to devalue. That productivity then creates more wealth.

So what creates wealth is productivity. And you can accumulate wealth by taking it from other people. But you can only maintain that wealth by redeploying what you've accumulated into a productive enterprise.

You accurately describe the money-go-round, but you don't define 'productive endeavour' - they are effective words though.

1984ReturnsForReal_2

Orpheo wrote: »

Remain ignorant.

Or dyslexic

Orpheo

1984ReturnsForReal wrote: »

Or dyslexic

It was clearly a grammatical error; lysdexia is illevarent.

princeofpounds

Wealth is stuff. Goods and services.

Money is a claim on goods and services and a method of transaction of those claims. It can be store of wealth, because as a claim on goods and services it has a value, but it is merely a representation of that wealth and not the wealth itself.

When rich people say they are wealthy, what it really means is that they have a larger claim to all the stuff in the world than most other people. Whether by owning it directly or owning lots of money to buy control of it should they wish.

Forget notions of 'profit' for now. Just concentrate on goods and services.

The poster above who claimed money constantly depreciates is wrong. Inflation is the normal course of events but not necessarily.


I suggest that you take a look at the excellent Khan Academy tutorials for more information on what money is and how the economic systems work. In particular one on banking and then the one on basic economics.

http://www.khanacademy.org/

It's all free. It's also all conventional theory. Ask question like this on an internet forum and you'll get all sorts of people directing you to their pet theories on the issue, whether they are goldnuts, NWO conspiracists, or more respectable dissenting theories like Austrian Economics (which wouldn't dispute on this particular issue you raise). Many are just plain ignorant.

That's all great and interesting, but there are a reason that conventional economics has become conventional -because the peer group of economists think that it is the best understanding we have to date on the system.

1984ReturnsForReal_2

Orpheo wrote: »

It was clearly a grammatical error

Ah. Thanks for clarifying.

I will have to write to the Dyslexia Association & tell them they are wrong and it is not a possible sign.