First Law of Economics?

[Boracay]

I cannot work out where all the money has gone.

As far as I can work out there has to be some first Law of Economics (rather like the First Law of Thermodynamics) that states that it is not possible to "destroy" money. The central banks could call it back and write it off, but unless they have done that the money has to be somewhere. All those loans, scams, executive bonuses, wars and so on can only have transferred it.

So, where has it all gone?

[nonam]

Ha,I cant resist bringing this up.Many people hate people who sell stocks short and blame them for many ills.Now if a person shorts an equity and it crashes and he buys to cover,the losses in that equity become his gains.The wealth is transferred to him and is still in circulation.But if that equity was not sold short before it crashed and the owner sells it at a loss,then that lost wealth is gone permanently if the equity should never recover.

[GordMay]

I always thought that the first two laws of economics were:
1. For every economist, there exists an equal and opposite economist.
2. They're both wrong.

[amytom]

Originally Posted by GordMay

I always thought that the first two laws of economics were:
1. For every economist, there exists an equal and opposite economist.
2. They're both wrong.

Does that apply to politicians too?

[sailorboy1]

Most money isn't "real" and is just a number, which is way it can disappear (only existed in your mind to start with).

Economists have a great job. Only the weather people have as good of one where you are wrong most of the time, but still get paid.

[sv_makai]

My work and degrees are in Finance and Economics. The one thing learned along the way is:

If you put 10 economists in a room and ask a simple question you will get 12 different complicated answers!

[svHyLyte]

The essential law of Economics is Demand and Supply.

The more taxes one supplies, the more taxes the Dem's demand.

Likewise with investment banks. The more "bonuses" and "perks" boards of directors supply, the more bonuses and perks CEO's, CFO's, and COO's demand.

[nautical62]

Unlike energy, money can be created out of nothing by the government. They don't even have to physically print it any more. The result of course is inflation which devalues your after tax income. Of course, when one owns a boat, that's where the money goes.

[bene505]

Originally Posted by Boracay

I cannot work out where all the money has gone.

As far as I can work out there has to be some first Law of Economics (rather like the First Law of Thermodynamics) that states that it is not possible to "destroy" money. The central banks could call it back and write it off, but unless they have done that the money has to be somewhere. All those loans, scams, executive bonuses, wars and so on can only have transferred it.

So, where has it all gone?

Not sure where I'm going with this. I started typing and this is what I came up with. Maybe someone could edit this to make it more accurate:

Since it's not tied to gold anymore or anything else real, in the long term money is the biggest ponzi scheme. We accept money for our work because 1) it's easier than getting paid in chickens and 2) it has always had some value, much like we accepted that house prices would always go up. More specifically, it has value simply because there's another sucker who will work for it and you'll get paid back with something tangible eventually.

Politicians control how much value it has. Enough said about that, except for the fact that different countries have differrent politicians, so in the short term, the value of money varies as suckers do currency exchanges, effectively moving from one ponzi scheme to another, like changing lanes on a shaky bridge.

Why is it a ponzi scheme, really? Generally-speaking, politicians help their friends, help themselves, and buy votes. Over time they've leveraged every way of doing that that they could, without causing enough ruckus that people would notice the money ponzi scheme. Social security, welfare, medicade, pork spending and bail-outs -- these things tap the money ponzi scheme. Like Madoff writing a smallish check to an existing investor, a check written to someone who isn't working for it shortens the life-span of the money ponzi scheme bit-by-bit.

In the post-gold standard world, I think the measure of a good politician, is how little he/she helps friends and buys votes. This is where character and values and correct philosophy starts to matter, because a good politician starts thinking about "paying back" the people who worked for the money, instead of how to tap the ponzi scheme for his/her own ends. With the right politician, money becomes less a ponzi scheme and more a trusted means of exchange. With a couple generations of the right politicians, money could even be put back on a gold standard or other standard(s). Until then it's an unstable, devaluing method for politicians to serve their own ends, to the extent they can get away with it.

Right now it looks a lot like a ponzi scheme getting tapped to the max.

[Maren]

Originally Posted by amytom

Does that apply to politicians too?

Usually. But when the parties get out of balance, things tend to get really messed up.

[GordMay]

We seem to be conflating Money with Wealth.
As Adam Smith understood, money itself is not wealth; instead, it is a good that we use in order to obtain wealth.
Wealth is something that has real value (lasting asset) in meeting our needs and fulfilling our wants (valued by people).

Having more money does not insure happiness. For instance, people with a hundred million dollars are probably no happier than people with ninety million dollars.

[sailorboy1]

I volunteer to help by taking the $10M so level the happiness field!

[Bill Burgette]

I've always found money to be realtive. When my son was a lad he asked me the difference in a million, a billion and a trillion. I had a micrometer handy and measured a dollar bill. I was as surprised as he at the results.

A millian one dollar bills stacked in top of each other is about 333 feet. A city block, perhaps.
A billion dollar bills was about 60 miles. roughly the distance from Marathon Key to Key Largo.
A trillion bills stacked the same was is about 63,000 miles or about 2 1/2 times around the earth at the equator.

And.....we are how many trillion in debt? Sure makes a new set of sails look pretty cheap.

[GordMay]

Bill: I presume you were using the American system.

The system used in the U.S. is not as logical as that used in other countries (like Great Britain, France, and Germany). In these other countries, a billion (bi meaning two) has twice as many zeros as a million, and a trillion (tri meaning three) has three times as many zeros as a million, etc. But the scientific community seems to use the American system.

Here is a table of large numbers:

Number of zeros ~ U.S. & scientific community ~ Other countries
3 - thousand - thousand
6 - million - million
9 - billion - 1000 million (1 milliard)
12 - trillion - billion
15 - quadrillion - 1000 billion
18 - quintillion - trillion

What Americans call a trillion (1,000,000,000,000) , some others only call a billion.

[David_Old_Jersey]

Originally Posted by Boracay

I cannot work out where all the money has gone.

So, where has it all gone?

The money wasn't there in the first place. and then it got spent.

It's easier to understand if you relate to things personally. If you spent money you didn't have, lets say 5 times your salary every year for 10 years, you wouldn't need to be a rocket scientist to work out that sooner or later a day of reckoning would arrive........and by Karumba (sp? ) that day has arrived