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Mortgage Equity Withdrawal
Comments
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I cant see this at all. Surely all payments for goods or services are simply a transfer of wealth. That's what money is - a mechanism for wealth transfer. A net increase in wealth comes from efficiencies of mass or mechanised production. So if one dog walker can walk 2 peoples' pooches expending the time and effort that each owner previously expended, society as a whole has gained by the extra labour-time available to do other things.
To take another example - why is a barber not "wealth creating" whereas a comb manufacturer presumably is?
You need to see my original post 8 as well.
But take your comment about dog walkers. I pay a dog walker £10. His 'labour' has earned him £10, and I have £10 less in my wallet. No wealth at all has been created. We have simply spread existing wealth around. Same thing if he walks your dog too, because his same labour has earned him £20 (good for him), but again, that's cash/wealth neutral.
OK, you're right to say that it frees up our own time. But that's a totally seperate event. If we both use the time to go car cleaning, then same story. If we both use the time to manufacture wheelbarrows, then this is the wealth creation to which I referred. The act of selling the wheelbarrows is, again, totally wealth neutral overall, but I fear you are missing a point.
To understand, we must look at my balance sheet. A week ago, all I owned was £100, which I used to buy £100 worth of metal. I laboured all week and produced 10 wheelbarrows, each worth £20. My balance sheet now legitimately shows Cash: NIL, Stock in Trade: £200. Total Assets: £200. So I have created £200 of wealth. Next week I'll turn that into cash and pay the dog walker.
The builder who buys my wheelbarrows exchanges £200 cash for them, which immediately shows up as 'tools of trade' in his balance sheet. Then he watches 10 wheelbarrows depreciate pretty quickly to nothing. So £200 of wealth has been consumed by depreciation. But it helped him to make other wealth building houses with less labour....taking us into yet another episode...
Hence, you are technically right when you say "Surely all payments for goods or services are simply a transfer of wealth." That, however, was not my thesis. But the labour that goes into the making of goods physically increases the wealth [until it gets consumed/depreciated] but services don't. The country's total net assets cannot increase because you or I had a haircut. But that's not to say that it's bad, because it smoothly allows wealth to move around and compensates for the labour involved. Both parties are 'happy'.
Clearly there is an equation about the type of goods manufactured. At one end, we have food/cigars... which get consumed almost instantly. A computer manufacturer's goods depreciate in, say, 5 years. A car manufacturer, probably 10. a Machine tool, maybe a bit longer. Curiously housing, works of art etc. probably appreciate rather than depreciate, making house building one of the best methods by which any society increases its wealth.0 -
Nice nominal chart...
...however given the overall goods plus services deficit seems to generally be less than goods deficit I would say this suggests we are running a (considerable) surplus in services which is how I read the post you are commenting on but perhaps you see it differently?
Quite right!0 -
Nice nominal chart...
...however given the overall goods plus services deficit seems to generally be less than goods deficit I would say this suggests we are running a (considerable) surplus in services which is how I read the post you are commenting on but perhaps you see it differently?
Thank you without the Service surplus we would just be more in the brown stuff.
I guess we will have to see how the impact on financial services plays out longer term."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
in what way is there a difference between a UK person tree felling for his neighbour and a UK person building a car for his neighbour or digging coal or smelting iron?
May I refer you to post 22 above?
I think you maybe are not fully appreciating that "wealth" includes not just money (cash or a balance in the bank) but in "goods" as well. Just glance at any balance sheet of (say) a car manufacturer. It might well contain a £million or two wrapped up in cars sitting in their huge park, awaiting sale to dealers.
But the best example is a house builder. £60K of land, £30K of materials, £50K of labour is £140K of 'transactions'. His final transaction of selling it for £180K [or of holding it in his books as a £180K asset unsold] means that £40K has been created.
And incidentally (part of my original post) take your car making example. Let's say you labour hard, and turn £10K worth of metal, glass and rubber into a car 'worth' £12K, you have created £2K wealth. The act of selling the car to your neighbour crystalises that extra wealth. Then, as I have said, it will depreciate. But now sell it, instead, to an American, then superficially 'only' £2K wealth has still been created. The transaction of selling it is simply a transfer. But the thing that makes exporting better [and why people underestimate our balance of payments problems] is that the car will eventually depreciate, thus destroying wealth. I would much rather the USA suffer this destruction in wealth than UK.
Ultimately, the negative deficit we suffer is destroying our wealth by huge amounts. £40/50 billion a year is a non trivial amount.0 -
Loughton_Monkey wrote: »May I refer you to post 22 above?
I think you maybe are not fully appreciating that "wealth" includes not just money (cash or a balance in the bank) but in "goods" as well. Just glance at any balance sheet of (say) a car manufacturer. It might well contain a £million or two wrapped up in cars sitting in their huge park, awaiting sale to dealers.
But the best example is a house builder. £60K of land, £30K of materials, £50K of labour is £140K of 'transactions'. His final transaction of selling it for £180K [or of holding it in his books as a £180K asset unsold] means that £40K has been created.
And incidentally (part of my original post) take your car making example. Let's say you labour hard, and turn £10K worth of metal, glass and rubber into a car 'worth' £12K, you have created £2K wealth. The act of selling the car to your neighbour crystalises that extra wealth. Then, as I have said, it will depreciate. But now sell it, instead, to an American, then superficially 'only' £2K wealth has still been created. The transaction of selling it is simply a transfer. But the thing that makes exporting better [and why people underestimate our balance of payments problems] is that the car will eventually depreciate, thus destroying wealth. I would much rather the USA suffer this destruction in wealth than UK.
Mr Monkey, I think you are a closet Marxist. You are getting rather close to the Labour Theory of Value. You just need the one further step that the £2 of wealth created by the worker should be his (hers) but instead is grabbed by the wicked capitalist.
A few points:
1) What about the office staff in the car plant - are they producing wealth or is it just the guy who welds the car together? Or perhaps the machine that welds the car together? I find it difficult to see how a pay-roll clerk working for a car company is wealth producing whereas someone doing exactly the same job for a local authority isnt.
2) Your car example could be applied to haircuts. The barber has certain costs but creates something that is worth more than the basic costs to you. It must be worth more as you are prepared to pay his charges rather than do the job yourself. And of course his efforts depreciate over time.
3) Another example based on your approach - a used car salesman. He buys a car for £10K and by applying polish and smooth talking creates something that you are prepared to pay £12K for. Therefore he is clearly contributing to our national wealth as much as a car builder who buys raw materials for £10K and creates a new car worth £12K.
3) Maslow tells us that as our basic needs for food and goods are satisfied the intangibles become more important. More goods beyond those we feel we need dont actually increase our well-being. Service workers produce the intangibles and what they produce has a value - we are prepared to pay for it quite possibly in preference to a tangible. For example you may well use some spare money to take an expensive holiday rather than buy an even more luxurious car.0 -
Loughton_Monkey wrote: »May I refer you to post 22 above?
I think you maybe are not fully appreciating that "wealth" includes not just money (cash or a balance in the bank) but in "goods" as well. Just glance at any balance sheet of (say) a car manufacturer. It might well contain a £million or two wrapped up in cars sitting in their huge park, awaiting sale to dealers.
But the best example is a house builder. £60K of land, £30K of materials, £50K of labour is £140K of 'transactions'. His final transaction of selling it for £180K [or of holding it in his books as a £180K asset unsold] means that £40K has been created.
And incidentally (part of my original post) take your car making example. Let's say you labour hard, and turn £10K worth of metal, glass and rubber into a car 'worth' £12K, you have created £2K wealth. The act of selling the car to your neighbour crystalises that extra wealth. Then, as I have said, it will depreciate. But now sell it, instead, to an American, then superficially 'only' £2K wealth has still been created. The transaction of selling it is simply a transfer. But the thing that makes exporting better [and why people underestimate our balance of payments problems] is that the car will eventually depreciate, thus destroying wealth. I would much rather the USA suffer this destruction in wealth than UK.
Ultimately, the negative deficit we suffer is destroying our wealth by huge amounts. £40/50 billion a year is a non trivial amount.
one can own a car by several methods
-one can build it
-one can grow some corn and exchange corn for the car
-one can sing a tune that people pay to listen to and use the money to buy a car.
one can build a car that pollutes the atmosphere, produces CO2 and knocks over a child... this has value
a doctor can save the life of the child ... this has no value
I suggest you have a definitional deficit.0 -
Mr Monkey, I think you are a closet Marxist. You are getting rather close to the Labour Theory of Value. You just need the one further step that the £2 of wealth created by the worker should be his (hers) but instead is grabbed by the wicked capitalist.
I fail to see why you seem to be vilifying my simple statements, which are simple common sense, and out of the 'Janet and John' primer of basic economics, surely? It is not marxism at all.
But I can only answer your other points - again - from common sense, which I would have thought you could have worked out for yourself.A few points:
1) What about the office staff in the car plant - are they producing wealth or is it just the guy who welds the car together? Or perhaps the machine that welds the car together? I find it difficult to see how a pay-roll clerk working for a car company is wealth producing whereas someone doing exactly the same job for a local authority isnt.
The office staff in a car plant are somewhat irrelevant. Provided the car plant, as a whole, buys £1m of metal, rubber, glass etc., buys £2m of 'labour' [staff costs], suffers £½million depreciation, and turns out cars worth [and sold at] £4½million, then the whole operation has created £1million of wealth. Agreed? All you are raising is the concept that Mary in the office might be scratching her @rse all day, or simply grinding away on paperwork. So you are now introducing the concept of efficiency, or lack of it. That's a whole new debate and can of worms, and simply means that had the employer managed things better, then he could have created a bit more wealth. Same cars but at less cost.2) Your car example could be applied to haircuts. The barber has certain costs but creates something that is worth more than the basic costs to you. It must be worth more as you are prepared to pay his charges rather than do the job yourself. And of course his efforts depreciate over time.
I don't get your drift here. My previous assertions still hold. The act of spending 30 minutes of labour cutting your hair for £20 is not creating any wealth for the UK. Immediately after, he is £20 richer, and you are £20 poorer. But you are both perfectly happy. The barber has 'created' wealth for himself, true enough, but putting your accounts and his together, you would see no difference in total wealth.
Of course he has costs, but look at his transactions. A bit of rent. Cost of buying hair gel.... The hair gel manufacturer has 'created' wealth for sure. So has the scissor manufacturer. But the act of selling it to the barber was 'wealth neutral' to the barber. His rent has transferred wealth from him to his landlord...3) Another example based on your approach - a used car salesman. He buys a car for £10K and by applying polish and smooth talking creates something that you are prepared to pay £12K for. Therefore he is clearly contributing to our national wealth as much as a car builder who buys raw materials for £10K and creates a new car worth £12K.
Well of course. Trade in goods typically sees the wealth creation process along all elements of the supply chain. But you are dealing here with a depreciating asset. Read again what I say about depreciation destroying wealth.
Typically (to simplify) a car manufacturer will spend £15K total costs and sell to a dealer for £18K, creating £3K wealth. The dealer will register it and sell it for £20K, creating another £2K wealth. You will exchange £20K of your money for the car (wealth neutral at that instant). The minute you have it home, it is depreciating. After 2 years you have 'lost' £10K in depreciation when you sell it back to the dealer. His 'expertise' and time adds further value, when he sells it for £12K, but of course it will rapidly depreciate over time.
Alternatively, one might argue that the owner lost only £8K in depreciation, because it was 'worth' £12K all the time. But these are only accounting issues and not 'absolute' and totally accurate measures of wealth. Wherever there are goods (say a new or used car) there is value or wealth. That physical accurate valuation of it at any one time is an imperfect science, and is influenced heavily by supply/demand.
All you have to ask yourself is if car manufacturers all went on strike for 5 years. Didn't produce a single car. Would this change the total wealth of the nation. Answer yes. In very complex ways. If barbers went on strike for 5 years, would this change the total wealth of the nation? Answer no.3) Maslow tells us that as our basic needs for food and goods are satisfied the intangibles become more important. More goods beyond those we feel we need dont actually increase our well-being. Service workers produce the intangibles and what they produce has a value - we are prepared to pay for it quite possibly in preference to a tangible. For example you may well use some spare money to take an expensive holiday rather than buy an even more luxurious car.
I have no problems with that. But again READ MY POSTS and see where I have said anything conflicting with it. I am dealing with simple concepts of wealth as would be recorded in any full measure of 'National Wealth'. Goods have a physical value [but most often they get consumed or depreciate]. For normal civilised reasons we all have our hair cut and styled, or our cars washed... but our balance sheets would not show any value (or wealth) attached to having smart hair or clean cars.
Service industries are fine. They allow wealth to be transferred and equalised nicely. We could not survive in a civilised society without service industries. But they generally do not create wealth itself. Instead, they provide opportunities for individuals to create wealth for themselves at the cost of others. Goods industries do/can create wealth. But that wealth created generally depreciates or becomes consumed over time. Why is this so difficult to understand?0 -
.......one can build a car that pollutes the atmosphere, produces CO2 and knocks over a child... this has value
a doctor can save the life of the child ... this has no value
I suggest you have a definitional deficit.
On the contrary. You seem to find it extremely difficult to distinguish between "Value" and "Wealth". Look them up!
Actually, doctors are quite wealthy.0 -
Loughton_Monkey wrote: »I fail to see why you seem to be vilifying my simple statements, which are simple common sense, and out of the 'Janet and John' primer of basic economics, surely? It is not marxism at all.
Claiming it is Marxist isnt vilifying your statement. In my view Marx had a great insight into many things.
........
All you have to ask yourself is if car manufacturers all went on strike for 5 years. Didn't produce a single car. Would this change the total wealth of the nation. Answer yes. In very complex ways. If barbers went on strike for 5 years, would this change the total wealth of the nation? Answer no.
Suppose the car plant continued making more and more cars that simply sat in the plant's car parks. Would the nation be wealthier?
I have no problems with that. But again READ MY POSTS and see where I have said anything conflicting with it. I am dealing with simple concepts of wealth as would be recorded in any full measure of 'National Wealth'. Goods have a physical value [but most often they get consumed or depreciate]. For normal civilised reasons we all have our hair cut and styled, or our cars washed... but our balance sheets would not show any value (or wealth) attached to having smart hair or clean cars.
That is a limitation of our balance sheets. However each of us in our actions show that we take a more complex view of things.
Service industries are fine. They allow wealth to be transferred and equalised nicely. We could not survive in a civilised society without service industries. But they generally do not create wealth itself. Instead, they provide opportunities for individuals to create wealth for themselves at the cost of others. Goods industries do/can create wealth. But that wealth created generally depreciates or becomes consumed over time. Why is this so difficult to understand?
The problem is that you are using a simplistic definition of wealth and making circular political deductions from that definition. If you define wealth to be the quantity of physical goods then, sure, by definition services become dependent on and are secondary to the quantity of physical goods. That is the nature of your definition, not the result of a reasoned argument and certainly not a guide to the political management of an economy.
The only advantage I see of that simple definition of wealth is that it is easily measurable. I would define the wealth of a nation to lie in the well-being of its inhabitants. Its a bit difficult to measure but in my view it does provide a better guide as to what political decisions should be taken.
In your world digging more mines, creating more factories, have people work more hours is automatically desirable if it creates more "wealth". However if the majority of the population do not gain in tangibles by this by more than they lose on the intangibles then the increase in wealth as I would see it is illusory.
We see the effect in the current political arguments. The government claim that they are in the process of creating more "wealth". Yet has people's quality of life increased other than for the few very rich? I think most would see it as decreasing.0 -
Many people confuse standard of living with quality of life.0
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