I was just reading Paul Graham‘s Mind the Gap (still not done). He was talking about wealth vs. money. It reminded me of a realization I had just the other day, so I thought I would share it with all of you!
All the time I would hear people saying that there was unlimited wealth. This seemed to be an incongruency since I know that in the United States the federal reserve controls how much money is in circulation. Of course there is credit and other ways of paying off debt, but when it is all said in done, there is a very large, but finite amount of money available. I couldn’t see how anyone could say there was unlimited (infinite) wealth, since money was finite and limited.
Then it occurred to me. There may be a limited amount of money (cash, funds, credit, gold, notes, real estate, etc.) but that money is only useful to those who posses it when they spend it – exchanging it for a good or service. All the money in the world is of no value if there is no where to spend it. Even if they are getting credit against equity they own, they are exchanging money. In fact, I bet the total wealth available trades hands quite frequently. All the markets (stock, currency, commodities, real estate, etc.) are designed to speculate and make money directly from these exchanges.
That left me with the question, how many times in a fixed amount of time (say my lifetime) can a fixed amount of money trade hands? While this is probably technically a finite amount, for all intents and purposes it is infinite. So if it can change hands an infinite amount of times, is there any reason to think my hands can’t be in the mix? Not only is it practical to think that my hands would be included, but if it changed hands an infinite number of times, it is illogical to think it wouldn’t spend some time in my hands. It would have to, if I let it.
In order for this system to work I would need to be willing to spend the money that came into my possession, so that it could go into someone else’s possession. In fact, I could end up spending the same money multiple times. So if all the money in the world came into my possession only once, and I spent it all how I saw fit so long as I spent it all in that fixed amount of time (my life time, since I can’t take it with me when I go), would I be wealthy? HECK YEAH I WOULD! Monetarily speaking I would be wealthier then Bill Gates!
Of course the missing piece here is value. Money is traded for value. Actually, it is traded for perceived value. So, if I want to have all the money in the world at my disposal to spend then I need to make an offer that is perceived as valuable to someone who as money to spend. They I must provide a way for them to trade their money for my value. Sounds pretty simple to me.
Now this may seem really basic to some, but I guess there is a matter of knowing something in your head, and then really finally getting it in your core. I am pretty excited now!