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August 15, 2012 / 74

It’s not about Jobs, It’s not about spending

“If that construction worker has got a little extra money in his pocket, he goes and spends it maybe on a new car.  When we’ve got new teachers doing great work with our kids, then you know what, they go to a restaurant and spend that money.  And so suddenly businesses are doing well, the economy is doing well, and we get into a virtuous cycle”

Barack Obama (http://www.whitehouse.gov/the-press-office/2012/08/02/remarks-president-campaign-event-leesburg-va)

It’s not about “spending.”

It’s not about “jobs.”

It’s about PRODUCTION!

It’s about WEALTH CREATION.

A  job is simply how some people spend their time. Everyone has the exact same amount of time every day. What they do with it is a key to how the economy does.

If a person sits in front of a TV watching cartoons, has that person created wealth? No. If the government pays that individual to sit in front of the TV, has wealth been created? No. When that individual spends the money that the government gave him/her, has that individual created wealth? No. All that has happened is that money has been shuffled from a source, to recipients. Wealth has not been created – it has simply been redistributed.

In modern society, there are hoards of people who go to offices every day and do paperwork. This shuffling, creating, and distributing papers with marks on them, whether actual paper is used or just words and numbers on a computer screen, in the grand scheme of things, is irrelevant. Such people have jobs, but they do not create wealth. If a person sits in front of a computer shuffling numbers around, has wealth been created? No.

Depending on what that person does on the computer, it could be said that the person creates “value” – but value is not wealth. Value is relative, wealth is absolute. Value varies according to utility. ie if you create a romance novel, there are those who would think it is worth buying, and others who would disagree. So a romance novel has value for some, but not for others, so it is not wealth.

In today’s world, money has value, but may or may not be wealth – depending on what is being used as money.

So jobs may or may not create wealth. If a worker has a job shuffling papers around, or adding up numbers, or finding new ways to make money by buying and selling, that job is not CREATING wealth. It’s just shifting it around. Again, shifting wealth around does not add to the nation’s wealth. It just redistributes it.

Wealth is tangible. Wealth can be transferred between people or entities and stored. Wealth has value to any who hold it. Wealth can be exchanged for acts or things of value to the person “spending” (transferring it to another) it.

If you work during your daily 24 hours and produce value, and someone gives you value in the form of money, do you have wealth? Not unless the “money” is in the form of something that stores wealth. Due to it’s scarcity and decorative value, precious metals are generally considered to be “stores of wealth”. Paper “money” – whether currency or a “certificate” that assigns a right to access wealth – are not in and of themselves wealth.

So… when a politician says creating jobs and spending money will cause a “a virtuous cycle” (help make the economy healthy?) that politician is incorrect.

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