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Sunday, December 21, 2008

Some thoughts about money, the economy and wealth of nations

Since the U.S. dollar is no longer based on an amount of gold owned by the government, what exactly gives let's say a $100 bill its value and power?

The $100 bill is a symbolic device. Based on several agreed upon factors - the price of labor, price of goods, other factors - the owner of that $100 bill can expect to trade it for a certain amount of work from others or goods created or owned by others.

So, outside of the stable society where there are agreements and agreements are honored or can be forced to be honored through law, the piece of decorated paper - the $100 - would not have any value.

So, is money, or wealth, created out of thin air - like art - based on (in the case of money) how the creators of money (the Federal Reserve let's say) predict that society will function in the future - based on past performance?

Possibly. I am just starting to look into exactly what money is and what is behind the symbols, what makes modern economies work, so I don't have the answers yet. But it looks like that the ultimate things of value in an economic sense - things that create value or give value to the paper money - is people willing to work for the money so that they can acquire the money (get paid) & trade the money to others for their work or goods.

So, what about poor countries? Why are some countries poor? Specially if the US dollar is not based on a certain amount of gold owned by the government, why aren't other countries who also do not own a lot of gold as rich as the US?

Maybe wealth of nations is based on past performance, stability, productivity, and things that they own that can be traded.

So, can a country that is at the moment poor decide tomorrow to turn itself into a stable place with rule or law (with which comes the ability to enforce agreements, essential for commerce) and a productive place that works a lot and creates things or services that can be traded with people world wide in order to turn itself into a rich country?

Possibly.

I like the fact that the economy & wealth of a nation appear to be creative things - more like art - making something new out of "nothing"/various other things - and is less a fixed thing based on a certain amount of matter - like a pile of gold. Creative things are flexible and hopeful things, and thus it may be easier to turn this entire planet into a prosperous place if, at the core of wealth, are just ideas, agreements, and working, behavior - things most people can create or do if they want to - things that do not have any type of a significant physical limit (not like a pile of gold).

More exploration of the "magic"/art behind the economies & money is required. Should be fun & useful. Perhaps all these inquiries will lead me to create/work on some type of a D.I.Y. global wealth building side project. I think if people are willing to do the work (once they figure out what exactly needs to be done), crushing poverty on this planet can be ended.

- Sujewa

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