Punchinello’s Chronicles

December 3, 2009

1-Step Fix for the Economy

The simplest possible way to fix the national economy would be to change the way we measure that economy. Instead of measuring how much people are spending, let’s totally get rid of the entire concept of “spending money” as any kind of useful information! Remove it totally! Blow it off completely!

Remove entirely from the equation the factor of “consumer spending.” Get rid of it completely! Ignore it entirely! Wipe it off the books! Fuggeddaboudditt!

What’s an “economy?” How do we know if that economy is doing well or having problems? Polling data shows that most people consider “the economy” to be our biggest problem nowadays, but so what? What does that even mean if so few people even can define an economy?

One explanation of an economy is that it’s the exchange of “stuff” for other stuff. In other words, we could say that economy means exchange. That’s how we can call something a barter economy. Barter is the most basic and simple form of exchange. You give me that baseball card and I’ll give you this comic book.

When we get more sophisticated, we realize that everyone needs something, but not everyone can make a simple exchange. What if I want a hamburger, but all you have is a collection of butterflies? We need to figure out something that can capture an exchange in one form, store that transfer, then allow for a different exchange later.

Money is a way to capture the underlying value of an exchange. If I can give you money for your comic book, both of us benefit. By storing the value of the comic book in the money, you can go out later and exchange the money for a different comic book. I can exchange your comic book for someone else’s money. Then I can use that money to get a hamburger.

Ultimately, an economy is the overall interaction of people moving stuff around. Money is a helpful way to make it simpler to move stuff around, but money itself is NOT “the economy!” It’s only a tracking device.

Do you know that 71% of our “economy” here in America is defined as “spending money?”

Think about that.

What “stuff” are we exchanging when we spend money? What did YOU create, gather up, find, build, or otherwise “produce” the last time you spent some money? Did you create the money? No, of course not. That’s only legal when you’re the federal government.

How can we possibly say that spending money is “the economy?” It’s absolutely insane!

The super-duper intellectual and educated explanation is that you can’t have money without there being something behind that money. In other words, you wouldn’t have any money if you didn’t first have comic books, or a butterfly collection or a hamburger.

Long ago, that was true. Long ago, American money (the United States dollar) did indeed mean that some “stuff” existed behind that money. Long ago, there were coal mines, textile factories, farms, steel mills and all sorts of “stuff” being exchanged. You had a horse and you exchanged it for a wagon, or for some corn or cloth.

Then the highly-educated economists came up with a “better” idea. Everyone, everywhere would agree that gold was really valuable. Silver was really valuable. So we would measure out everything in the country — all the “stuff,” and match it with all the gold we could find.

The first and most basic modern economy said that for each “thing” there would be a certain amount of actual gold.

From there, it was easy to print little certificates. Each certificate said that if you took the piece of paper somewhere you could exchange it for a particular amount of gold. When I traded my pocket knife for your hatchet, I could either give you some gold, or I could give you a certificate that said I own some of that gold. Or, I could just give you the pocket knife.

The way we measured the overall economy was by measuring how much gold we had, and measuring how much stuff there was at any given time in the country. Who cares where the stuff actually is located? Who cares whether Billy has the comic book and John as the pocket knife?

What mattered most was that last year there was 1 pocket knife, 1 hamburger, and 1 comic book. This year there were 2 pocket knives, 4 comic books, and 12 hamburgers. The economy was growing. Why?

Because there was more stuff, people had more options about exchanging that stuff. A new invention came along and suddenly we had hot dogs. Then another invention came along and we had glass windows. The economy now included those new inventions, along with the comic books, knives, and hamburgers. The economy was growing!

As long as everyone WITHIN the borders of the country were exchanging paper certificates for stuff, or exchanging actual stuff for stuff, then everything was fine. The amount of paper certificates could get larger; we could print more certificates to account for new inventions, new ideas, new services, more food and so forth.

But when a whole lot of people aren’t making things, aren’t growing food, aren’t building things and aren’t creating “stuff,” then what?

The highly-educated economists told us that it didn’t matter. None of that nonsense mattered! What mattered, instead, was how often someone moved a certificate from Point A to Point B. That’s all that mattered! That’s what made an economy! That’s what created more stuff.

Americans started using certificates to exchange for stuff outside the country. We sent our paper certificates to Europe, and they sent us back chocolate, cars, horses and wooden shoes. The theory was that sometime down the road, the Europeans would either trade in their certificates and get some real gold, or they would give us back some paper in exchange for comic books, hamburgers and pocket knives.

“Made in America” meant something was really good stuff! Now, the only real measure of anything (according to the highly-educated economists) is how much money did you spend last week! Nobody cares a whit about what you PRODUCED last week! All anyone cares about is how much did you spend!

“The Recession will likely continue with a weak recovery, but it all depends on the American Consumer. Without consumer spending, the recovery will be very slow and weak.” Hah!

The actual headlines and stories should be about what are we making! What new products, new inventions, new services, new food and so on are we adding to the “economy?” How can we “spend” when there isn’t a real exchange taking place?

Are we exchanging our paper certificates for gold? Are we exchanging those certificates for steel, corn, wheat, or anything of actual value? No, we’re offering to help someone figure out a problem (consulting services). We’re providing medical know-how in exchange for certificates. In other words, we’re assigning some value to services, knowledge about things and other intangibles.

I’ll trade you my help and knowledge of how to put up a barn for your comic book collection. That’s fair, right?

But what if I ask you for your comic books and give you nothing at all in exchange? Other than some pieces of paper that say there may be some gold somewhere. What if there isn’t any gold?

What if I say that, okay, there isn’t any gold but the certificates represent a car owned by a friend of my father’s brother-in-law? If you REALLY want to redeem your piece of paper, go see him and he’ll give you the car.

Let’s get rid of this utterly and truly delusional “measure” of the economy based on spending pieces of paper money! It means nothing, does nothing, tells us nothing! It’s a complete and utter fantasy, created by way-over-educated Harvard economists with far too much time on their hands!

Consumer spending tells us absolutely nothing about the actual economy! It only tells us how much people want stuff! It measures need, desire, greed, lust and other examples of human feelings or emotions. In no way does “consumer spending” tell us a damn thing about how much stuff we have to trade with each other, or what we can exchange with people overseas.

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2 Comments »

  1. […] is the original: 1-Step Fix for the Economy « Punchinello's Chronicles By admin | category: gold car | tags: brisbane, certificates, father, interests-include, […]

    Pingback by 1-Step Fix for the Economy « Punchinello's Chronicles Gold just to Me — December 3, 2009 @ 6:30 pm | Reply

  2. […] This post was mentioned on Twitter by Inventor Education, Bradley Levinson. Bradley Levinson said: 1-Step Fix for the Economy « Punchinello's Chronicles: A new invention came along and suddenly we had hot d.. http://bit.ly/7bQLlX […]

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