What ~is~ rich, Capitalism, and why inflation hurts you.

//What ~is~ rich, Capitalism, and why inflation hurts you.

What ~is~ rich, Capitalism, and why inflation hurts you.

  So I was talking with a colleague earlier and came across a bit of an epiphany. It was one of those things that haunts my mind because it feels fairly accurate and yet I’ve not really done much study on the subject. So that is your warning, this is the mad ramblings of a random internet stranger, but I suspect you will find that most of what I say is either already proven to be true or will eventually be proven true.

  I really don’t know why either, most of the time I’m just babbling but I’ll be damned if I end up being either correct or very close. Perhaps I should write a book called “Guessing your way to success, sometimes.”

  I am about to explain why inflation happens, or in some specific sense why it utterly ruins the heck out of your life. It’s pretty cool, I think you’ll enjoy it and as I said before it might not be correct or proven yet but I’m sure it will be, if it hasn’t.

  There is a cycle in the united states, this cycle happens in all capitalist nations and likely all nations in general. The gist of it is this, the nation prints a certain amount of currency and the goal is that that currency will be continuously traded between parties. As long as this is the case it creates a system where that money has a value, everyone has agreed that they will take it for goods and that it is a physical replacement for time lost through work.

  However people want to save some money for the future, each time a bit of money is saved this removes money from the system. The system is finely tuned and must have enough currency for all systems to be trading around. Think of it this way, you have 5 people and 10 dollars. Each of you can give a dollar to a different person and assuming you keep this spread even there will always be money available for transfer and payment.

  But imagine if one of these 5 people keeps both of their dollars and just takes a third. Now you only have 8 dollars transferring between parties but you still have 5 people that need to have money. One person now has 3 dollars and another has 1, the rest have 2.

  Imagine then if this continues to happen at really any rate. That person had 3 dollars and now they have 4, there are 5 people and now only 6 dollars in circulation. Even further and only 5 dollars in circulation, etc.

  There are two ways to observe this phenomenon, probably more but two that jump out at me, imagine if you were an outside observer who tracks the money. Lets say you can’t see that one person has all the money and assume that the system is still running as planned, you might think that something natural has happened and that we don’t have 5 people but now actually have, say, 9 or 10. So your money that used to be leveled at an amount of roughly 2 per person is now spread thin at one.

  So in turn you print more money to even out this system so that you have the previously approved 2 dollars per person. In doing so you have theoretically increased the amount of wealth in the total national coffers. It would appear that with double the money the value is now half (this is not how it works out, I’m just being overly simple because I am tired), so now everything costs twice as much to break even.

  The problem is that people don’t suddenly have more money, they have the same amount of money they had previously. So now their lives cost more but their opportunities have not improved. Now for that hoarder that has taken 4 dollars already they are already at that butter zone, for them life hasn’t gotten hard and really is just back to normal.

  So what do they do? Now that there is more money available they start hoarding more. This once again slowly removes money from circulation creating the impression that there is some level of growth in the nation. People are doing well and saving tons of money! This is fantastic!

  But the reality is that you have this 1 person out of the 5 that is basically siphoning off the currency from the system and creating an error. Capitalism only works if people are spending their money and this person is not doing that. For them the game has become a matter of having the most of it, even if it won’t actually be used for anything.

  Extrapolate this then, you have a nation of 300 million people. You print enough money to handle the day to day lives of these people. What do you do when say 1% of the population has funneled out 38% of the total money printed? You are now running a nation of 300 million people off the revenue of a nation of 186 million. What about the other 114 million people? Well last I knew the US has 15% of its population under the poverty line which works out to something like 45 million people. So it would appear that when you drain 38% of the economy out of the system you end up with 39% of that 114 million in poverty.

  Now is it a coincidence that 39% of 114 million people end up in poverty when you remove 38% of the revenue from a population of 300 million? Yes, yes it probably is. I’m stating this now so that folks don’t try to make a connection, I mean feel free to try but it is a coincidence. Why? Well the US population isn’t actually 300 million, it is 311 million. Which would make 181.82 Million the benchmark for total revenue. Then 15% would be 46.65 million people which is 40.9% of that 181.82 in poverty. It’s still pretty close but not as close.

  This is why inflation hurts you however. The federal government prints more money in hopes that more money in the system will spur growth through purchasing. You purchase goods from your local business, they pay their employees, those employees then buy more goods from other places, and eventually the money makes it back to you in your paycheck. This system is actually basically perfect but it can only be perfect if everyone is spending.

  Capitalism is a system of debt, you cannot have people saving money in this system. If people are saving a reasonably small amount the impact is not all that noticeable. But imagine if the amount they are saving is a big amount.

  There is, as far as I can find, 46.5 trillion dollars in the world. Now you have to go through and do conversions and then you have to be dealing with currency that actually transfers, and so forth, but at the end of it all the amount appears to be 46.5 trillion dollars in actually workable capitalism accepted funds. This is the kind of stuff that passes around and can be used in this system, basically you have 46.5 trillion units of blood for the veins.

  What do you do then when 21 trillion of that is sitting in offshore bank accounts?


  That is nearly half of all the money printed for circulation in the world removed from the pool. If my guesswork is correct (which I’d like to think but take this all with a grain of salt) this means that with a world population of 6.97 Billion [wait under 7? Who died?] we have enough money for 3.14 billion people.

  I bring this up because one of my uncles recently said “We can’t tax the rich to fix this problem, they don’t have enough money.” I appreciated the regurgitation of talking points but it ignored the fact that that is patently untrue. When people think rich now they are thinking millions of dollars. Which I admit feels like rich to me.

  But this isn’t a matter of people with a million dollars holding it in a bank. We are talking about people with hundreds of millions, thousands of millions, or groups of people with thousands of thousands of millions of dollars. These are people who are so rich they see your local millionaire and chuckle at their poverty.

  A Billionaire is a thousand times richer than a millionaire. Let that sink in, Forbes lists 400 people on its top 400, do you know how many are billionaires? All 400. Their average net worth is 4.2 billion dollars.

  21 Trillion dollars is enough money to fix every debt crises in every country in the entire world with quite a bit to spare. This is not victimization, this is not picking on the ‘man’, this is a matter of the very system people love so much [for whatever reason] being drained of its blood like a cow to slaughter.

  You cannot sustain a system built with 46.5 trillion dollars where almost half of that is sitting in bank accounts unused. Actual rich people don’t spend money, they make money, then they make money off that money just by having it. There is no spending involved. People like Bill Gates are extremely rare, the amount of Forbes billionaires that actually reinvest into basically anything but their own bank account is slim.

  This is why college cripples you, why a car is a major investment, why a house is likely impossible, why trips will crush you, why every damn thing around you seems so much more expensive than it did in say 1900. As capitalism has grown so has economic gravitation, as I said before money attracts money and eventually it creates these points that are so massive that no money can escape.

  The veins of this system are literally being bled dry and the only place money from this is going is into political contests to help perpetuate the system.

  But I don’t want to leave this on a political note. So just mull it over, think about this little thought experiment of mine and on how difficult it is for you to basically do anything without going grossly into debt. Think about how quickly prices on things rise versus actual income levels (which remain mostly stagnant by comparison), and then think about how quickly this money has been funneled.

  If I didn’t mention it directly, basically inflation basically hurts you because money is printed in response to a perceived population growth. More money enters, value drops because of the belief that more money is in the system (when it isn’t), so everyone actually doing what you are supposed to do in Capitalism is hurt. The logical fallacy is that money trickles down, but like an intestine it’ll only keep going out up to a certain intake, once you pack too much into it it’ll get stopped up and never release.

  That’s a hell of a visual >.>…sorry for that.

  I will be utterly mind blown if someone can’t find a direct causal relationship between the speed at which money has been funneled into these accounts and the collapse of economies globally. My brain will convert to pure energy and I will become an omnipresent entity that floats across the galaxy.

By | 2012-10-09T21:59:54+00:00 October 9th, 2012|Journal|Comments Off on What ~is~ rich, Capitalism, and why inflation hurts you.