Web of Wealth - Latest Blog Comments

Four Types of Economy - Richard Veryard

Mon, 19 Apr 2010 05:47:56 +0100

For longer discussion, see the following draft paper. Comments please.

http://www.scribd.com/doc/29200229/Sempiternal-Coin-the-purpose-of-a-currency-is-what-it-does

So, Wealth creation - John Smith

Sat, 27 Mar 2010 13:01:12 +0000

Money is not only the goal, money is the measure. We have nothing else to gauge value by. How do you know you amount to anything? How do you know society prizes you? Money. The banker's creed and now the politician's: money is worth, worth is money, that is all ye know on earth and all ye need to know.

From: One by One, the So-Called Pillars of our Civilisation Tumble Shamefully by Howard Jacobson at http://www.commondreams.org/view/2010/03/27-6
A refreshingly fine read

So, Wealth creation - John Smith

Sun, 07 Feb 2010 18:28:17 +0000

To spend $1 trillion, one would have had to start spending $1 million daily soon after Rome was founded and continue for 2,738 years until today (Eric Margolis, Toronto Sun, this weekend).
Money may not be wealth but our lives will surely be less wealthy for being a trillion dollars poorer.

So, Wealth creation - John Smith

Mon, 01 Feb 2010 09:58:53 +0000

In the establishment's myopic conventional wisdom Banks nevertheless continue to be dubbed engines of 'wealth creation' .
Can't see it myself unless military prowess is a major facet of wealth.
I found this reading Tom Engelhardt the other day: the nonpartisan Congressional Budget Office has released its latest "budget outlook" indicating that the Iraq and Afghan Wars had already cost the American taxpayer more than $1 trillion in Congressionally-approved dollars, with no end in sight.
Bailing out our banks cost us that much. Remember those million people from whom I metaphorically took a thousand pounds to make a billion? Well, you only have to do that a million times and you've got a trillion. Easy, isn't it?
How macho can wealth get?

So, Wealth creation - Trevor Hilder

Wed, 13 Jan 2010 08:57:49 +0000

Ricardo Semler, who knows from experience, says that, once you have over about $6 million in assets, you can do just about anything you want, so anything beyond that is essentially meaningless.

"The Banks" are rewarding themselves for doing something that any idiot could have done, which is to make huge profits by taking free money from their governments and lending it at up to 10% interest rates. But apparently, this is so hard to do that they have to pay huge bonuses to retain the "talented" staff who achieved this mighty feat.

It is pretty clear that, beyond the first few million dollars, money is like heroine or crack cocaine - highly addictive. If you pay absurd sums of money, you do not attract "talent", you just attract money addicts. These people need rehab, rather than being allowed to rampage around the planet gaining accolades for their "genius" and being allowed to do whatever they want.

You should pity these, poor sad, people. They need help!

So, Wealth creation - John Smith

Wed, 13 Jan 2010 08:36:06 +0000

We can all agree that money isn't (necessarily) wealth but just consider a billion pounds:
If you took a thousand people and took a million pounds from each one you'd have a billion pounds.
If you took a million people and took a thousand pounds from each one you'd have a billion pounds.
If you took a billion people and took a pound from each one you'd have a billion pounds.
A billion quid set out like that is pretty hard to get your head round I reckon. But consider now that 'the banks' are preparing to award themselves 'bonuses' in excess of fifty of these billions. Consider too that bonuses are just a percentage of some bigger pot and the connections between pounds, people and wealth defy definition in any rational sense.
I mean, how many pounds are there in the world? And how many people? And how much longer is there?

So, Wealth creation - Trevor E Hilder

Sun, 01 Nov 2009 08:14:47 +0000

Trade obviously does create wealth, and the supporting services for that trade support that process of wealth creation. All of this is pretty clear and is not incompatible with a world where usury is illegal, as it is in the Islamic world and used to be amongst Jews and Christians. It is possible to provide banking services, insurance, etc without allowing the lending of money in exchange for interest on the loans. This was a lot more complex to handle in a world without cheap computers, but it could be made to work fine now that we have them.

I think we need to make the distinction between activities that support wealth creation and those that are parasitic upon it. Unfortunately, this distinction is impossible to make where there is no clarity about what wealth actually is.

I read an article by Bruce Anderson in The Independent recently (see http://www.independent.co.uk/opinion/commentators/bruce-anderson/bruce-anderson-lets-have-more-rich-bankers-not-fewer-1809441.html ), where he says, with reference to City bankers, "If the tax demands are too high, the bees will move to another hive." But how can we tell whether these people are bees, or parasites that have found a way into the hive so that they can steal the honey?

It seems to me that the real bees are the poorly paid workers of China who do the same jobs we do for about 10% of our salaries, then save 40% of their income. Those savings then get recycled through the City of London and New York to fund us borrowing money we will never pay back so that we can keep buying the stuff those Chinese workers are producing.

In order to distinguish properly between bees and parasites, we need an infrastructure for measuring wealth properly and tracking it from creation to storage to consumption and investment in new wealth creation. The purpose of Web of Wealth is to understand what wealth really is, then to build that infrastructure and distribute the tools freely to those that need them.

That journey has to start with an improved understanding of what wealth is. If we don't understand what it is, then we can't measure it!

So, Wealth creation - Jonathan Slack

Sun, 25 Oct 2009 09:34:59 +0000

Several issues are raised in this blog, each of which should perhaps be a discussion item in the forum post. But let's start with Trevor's claim that the City produces no wealth, it just moves money around and deducts some of it to pay obscene bonuses.
I think this is a bit like saying that fair trade generates no wealth because it is just an exchange of equal values. But trade does create wealth because of the different comparative advantage of the partners. In the extreme case the place with iron mines trades iron for the place that can grow sugar cane, so both have access to new materials at prices that would be impossible without the trade.
In the case of the City, banking, insurance, loans, annuities etc are all services that people are prepared to pay for, and that are very difficult and costly in effort to provide for oneself. We don't want to have to keep stores of gold at home and hire guards to protect them. So creating these services does count as creating wealth. You could possibly add the City's role in directing investments to the productive areas with the best returns although I am more sceptical about this in view of the casino-like nature of the markets in recent years.
I am also sure that the City creams off more than its fair share of the values passing through. It has been able to do this largely by making its operations appear very much more complex than they really are and so fooling people about what is going on. It is unfortunate that the present government, having nationalised several major banks earlier in the year, seems completely unwilling to use this power to make them behave in a more socially responsible way. This is even more true in the USA.

So, Wealth creation - Aidan Ward

Tue, 01 Sep 2009 13:56:14 +0100

The monetary systems we use are far from passive mechanisms. We use them because they are somewhere between useful and unavoidable and we do not ask questions about who gains what leverage because we do.
To me this is the ultimate piece of social irresponsibility, to allow innocent people's life chances to be wrecked because we do not know the real effect of our actions.
Money also goes deeper into our unconscious engagement with the power of society and the state. Try Margaret Atwood's "Payback" for a sense of this.
The world is more tightly coupled even than in our worst nightmares and money is the principal instrument of that coupling. We feel helpless and we don't even investigate how it all works.
The argument fro doing it differently is that we can't afford not to.

So, Wealth creation - Trevor E Hilder

Sun, 30 Aug 2009 13:31:30 +0100

It's a good piece, John.

My take on it is that, instead of just lamenting the idiocy of measuring wealth by measuring money, we need to design new monetary systems that actually do measure what we really care about.

People have been indulging in similar laments for over two thousand years, and the fixation on money has only become worse, particularly in the last 500 years in the West.

The monetary systems we use today were designed to enable nation states to finance the fighting of wars against each other. They are not suitable for our modern age, and we now have the technical means to design monetary systems that could work for all of us, instead of simply benefiting a handful of people who know how to manipulate the system to benefit themselves.

Pious statements on the subject do not change anything, except that they make people feel self-righteous and superior to those grubby people who love money so much!

So, Wealth creation - John Smith

Sat, 29 Aug 2009 16:38:35 +0100

True wealth is priceless: healthy, self-sustaining families and communities; a world free of homelessness, crime, war and terrorism; and retirements spent in dignity, not destitution. It's time to get priorities straight. Money alone is not wealth.

This is the closing para of a piece by Anna Manzo: amen to that and a good read at
http://www.commondreams.org/view/2009/08/29-5

So, Wealth creation - John Smith

Wed, 29 Jul 2009 04:41:27 +0100

Hiding one's wealth under a bushel, it seems to me, is not possible. This is true however that wealth is obtained. And in a small step from one little biblical allusion to another: as with the wise, so with the wealthy - by their deeds shall we know them.
The difference between a millionaire and a pauper is not a million pounds, it's that they act differently. Apart from that I reckon there's no iron law of wealth since, as I've shown above, I'm a pretty wealthy man without being either a millionaire or a pauper.
The Woolsack, on which lolls - or lolled until recent reforms - the all-powerful Lord Chancellor of England, symbolises both the source and the nature of this country's wealth. A few million sheep, a few thousand shepherds, a few centuries and a few enterprising inventions and, hey presto, wealth was created and the world was changed forever. And rule Britannia!
Today, sic transit gloria, the Woolsack might just as well be replaced by a heap of toxic credit derivatives. We (the country, that is, not you and me) still act as we did when our wealth was a reality. We arm ourselves with the weapons of the wealthy. We invade faraway countries. We demand our seat at the top table. We crave prestige. We mourn the loss of empire and influence.
Inside the country there are people who see things differently and act differently. They do things that simply enable them to do the things they want to do. They are creating wealth. By their deeds shall we know them.

So, Wealth creation - Trevor E Hilder

Sun, 26 Jul 2009 15:56:51 +0100

Hi John & Aidan,

John's anecdote about the old Egyptian with his wives brought to mind the behaviour of the alpha male of a chimpanzee troupe. It is about status display, and his reaction to the man with the Range Rover is a very English one, which is to denigrate such a display and to be resolutely unimpressed by it.

It seems to me that this isn't much to do with how wealth gets created. It is, rather, about what some people choose to do with it.

I'm a lot more interested in where and how the wealth gets created, rather than how it gets used in ostentatious status displays.

Aidan is right to be suspicious of my statement that the City of London does not create wealth, but sometimes a blunt statement provokes a response and that is what we are after, isn't it?

My take on the City of London is that it might create some wealth, but it doesn't create as much as it claims. If it does create wealth, then show us some evidence of it doing so.

Everybody will assent to the statement that the only justification for the activities of the City of London is that they do support the creation of wealth. Well, surely these guys need to provide a convincing demonstration that this is so, don't they?

Maybe we ought to apply Bill Livingston's principle of Scrutable Connectivity here? This says that, if you make a claim to be doing something, then you should be able to provide evidence that the actions you take, when combined together, do lead to the stated outcome.

So, if the City of London supports wealth creation, then it needs to provide evidence of this. It then follows that any form of financial instrument that cannot be shown to do so should be rendered null and void.

I wonder what effect the application of this principle would have on bank balance sheets?

So, Wealth creation - Aidan Ward

Sun, 26 Jul 2009 09:53:34 +0100

My turn to be puzzled by this exchange. John seems to be saying firstly that wealth is wealth and part of the point is you are not going to know how people came by it. secondly he seesm to be saying that he is not restricted by the wealth of others in the view he chooses to take on it, whether he is impressed or ever so unimpressed.
But this black box approach takes the Web of Wealth no further, we need to see inside the box to know how wealth creation is affected by the assumptions we make. Trevor's assertion that the City does not make any wealth takes a narrow slice out of a bigger system: it is also true that the City could not do what it does without an underlying "real economy". You have to have something to bet on, though people have never run out of things for that purpose.
So in our society, people use wealth to make more money by using it to impress people as part of what they do. Even if I spend my days shoeing horses I may need to impress people with how successful a blacksmith I am. This is one of the many ways that wealth is used, has always been used, and we can tell very easily that it tends to concentrate wealth in fewer and fewer hands.
Suppose, as students of local economies tell us, that a surplus is created by an economy (more than we started with) and that its rate of creation increases with the velocity of circulation of money. Velocity of circulation is some sort of opposite to concentration in the hands of the few, so there is some sort of opposition between weath as power and wealth as resources.
So for now, if we care about resources, do we not need to know where money is piling up so that it can be persuaded back into circulation? This is an element of transparency and in alternative money systems around the world, the money authority has to do just this to make it work.

So, Wealth creation - John Smith

Tue, 30 Jun 2009 12:14:29 +0100

Wealth gets created in lots of ways, I think, Trevor.
Back when I was working in Egypt, I stayed for ten or so weeks in an apartment in Cairo's 'old' quarter. Every Friday for those ten weeks, a fat old Alhaji, with a gold-tipped swagger-stick would saunter up the road towards the mosque for midday prayers trailing his four wives behind him covered from head to toe in black burkhas and in order of seniority. (I always imagined the little one, bringing up the rear, having to skip and trot to keep up sometimes.)
'Very wealthy man,' our concierge said to me, flicking his chin towards the parade from where we stood watching on the entrance steps to our block. He flicked his chin again so I'd be in no doubt who he was talking about. 'Very wealthy,' he repeated with a faraway look in his eyes.
I thought about similar ostentatious shows of wealth this morning at Sainsbury's as I watched a bloke parking his big shiny new Range Rover with its blacked-out windows. I watched how proudly he looked at it as he walked towards the store. I somehow misread his intended message, as I do whenever I see a blacked-out window. Instead of 'look how wealthy I am', I got 'look what a self-regarding pratt I am'.
Whatever my personal thoughts on these matters, they are both doubtless indicators of wealth. Or why have them?
They both say, 'you can look but you can only see what I let you see, because I own what's behind the burkhas/blacked-out windows.
Wealth indeed.

So, Wealth creation - Trevor E Hilder

Mon, 22 Jun 2009 13:14:15 +0100

Dear John & Aidan,

Stimulating stuff!

In many respects we are all absurdly wealthy. Even royalty a hundred years ago could expect their wives to die in childbirth, and a number of their kids to die before reaching adulthood. My grandparents, living in the Old Kent Road in London, lived a life more like that of the slums of Calcutta today than like the life I lead (but the climate was a lot worse, too!).

The weird thing is that we so rapidly become accustomed to the astonishing luxuries that surround us, take them for granted, and demand more.

The hygiene factors count for a lot, but they rapidly become invisible to us, until we go somewhere where they are absent. Their invisibility means that they can easily get dismantled, because people can't see how important they are. The fad for "deregulation" is a perfect example of how dangerous this is.

Aidan's point about the total lack of distinction in economics between wealth creation and wealth diversion or concentration is a very important point.

If you listen to the current debate about how to improve the regulation of the global economy, you will struggle to find any mention of this distinction. I have heard nobody point out that the City of London doesn't create wealth at all.

Everyone just assumes that, since it concentrates a lot of money in a confined space, and the government can get tax revenue from it, that must mean it created the wealth in the first place. This assumption is just plain nonsensical, but nobody ever challenges it.

The commentators all blather on about how important it is not to stop "financial innovation", since it creates so much wealth. But all it really does is create the appearance of wealth and a mechanism for diverting it into certain pockets.

Wealth gets created by people doing real work, not by manipulating numbers in spreadsheets!

So, Wealth creation - John Smith

Mon, 22 Jun 2009 08:17:13 +0100

I need to declare that, much as I admire his stuff, I've always had a basic disagreement with Ruskin. For me he's a bit too Panglossian and far too utilitarian. That said, he and some others like him did stupendous work for society and the public good from which we benefit to this day. So I'm wary of being critical. Reflecting on echoing Ruskin by saying that trust is wealth, however, I need to add a codicil.
I'm a huge fan of Fred Herzberg whose motivation theory (it's elegant and it works) gave us the notion of hygiene factors. Trust can only be wealth for me because - as I write at any rate - my hygiene factors are all in place. Take them away and who knows? All bets are off. You'd need to be Socrates or John the Baptist (or Ruskin) to trust without hygiene.
Immediate concerns dominate in the absence of hygiene. And they leave space for neither trust nor wealth.

So, Wealth creation - John Smith

Sun, 21 Jun 2009 15:45:33 +0100

A guru writes above and another guru - John Ruskin (1819 - 1900) - writes (thought I'd better check his quote after mangling the great man's words) in his book Unto This Last:

There is no wealth but Life. Life, including all its powers of love, of joy, of admiration. That country is richest which nourishes the greatest number of noble and happy human beings; that man is richest who, having perfected the functions of his own life, to the utmost, has also the widest helpful influence, both personal, and by means of his possessions, over the lives of others.

So, Wealth creation - Aidan Ward

Sun, 21 Jun 2009 14:28:45 +0100

John,
Great stuff, right on the button.
Let me come back to my starting point.
The attempt to corral a bunch of money or other convertible resources into one place is not the same thing as creating new goods. In fact there is every reason to think they might exclude each other. They have different impulses: the first to be power player, the second to enhance the world and people's lives.
As I see it economics makes no attempt to separate these two things, so that the circulation of money due to economic activity is just the circulation of money.
But just as bad money drives out good, mere concentration of money drives out the use of resources to do useful things. It really is not a good idea for the third world to subsidise the US economy.
Your material on trust is very good in this respect. The choices we make make a difference, and it is vital to be able to distinguish wealth creation from good old appropriation.

So, Wealth creation - John Smith

Sun, 21 Jun 2009 07:33:42 +0100

I kind of agree with Trevor here. But only kind of because I come at it from a different slant. That slant came to me like this:
My son sent me an extract from a book that a friend of his - a professor at a German university - is writing on monitoring trust in projects. Knowing how I feel about this topic, my son thought I'd (a) like to see it and (b) like to comment on it.
It was while I was commenting on it that the slant came to me. The bit of the book I saw was light on a definition of trust. And trust, if it's not defined, becomes amorphous and totally open to interpretation and monitoring, however that happens, becomes impossible. (Lack of a definition's not necessarily a bad thing but professors are supposed to be rigorous and the rest of the extract was entirely in keeping with the academic-authoritative approach to stuff. And, incidentally, I get spooked by authority figures and generally spend my time avoiding them. Aidan - gurus are inevitably authoritative - is the only authority figure I'm entirely comfortable with.)
So, my response to my son began with Aidan's and my definition of trust which runs:
* to trust is to rely on someone (or something) to take care of our interests
* trust allows us to extend our awareness to things that person can see that we cannot
* the choice of trust in either party is not subject to preconditions
* any event in a relationship can be used to enhance or diminish trust depending on the choices the parties make

This last point is where the slant comes from. John Ruskin reckoned Wealth is Life (or it might have been Life is Wealth, I can never remember). I agree with Ruskin but reckon Trust is Wealth because, in my relationship with life (the world, the universe...whatever) I can always make the choice to enhance, rather than diminish, trust. Ergo, I am a wealthy man.