What is money? Where does it come from, where does it go? This diary originated from a debate I had with a close friend last evening regarding the nature of money and how it is distributed in an economy. My argument was based on the idea that money is a resource, as such, it is limiting. (keep in mind we are not economists, but biologists, so we think in terms of the economy of resources). Because money is limiting, it must be limited, i.e. a finite resource. If it were not finite, it would not be limiting. At least this was my argument, this stemmed from the idea, that in an economy that supports the ultra-wealthy, assuming an inequal distribution of the remainder of the wealth necessitates that some individuals will be very poor.
His argument was that money is not finite; he based this on the "fact" that there are more people alive today than say 200 years ago and that a smaller percentage of those people are very poor and likely more are very wealthy. Therefore there must be more money available, implying money is not finite.
If this is true, where does money come from, not thin air. I always see money as simply cycling, I have money, I give you my money, you give "my" money, which is now your money to some else, and on and on it goes. This is likely complicated by the fact that the system is not closed, it can be fed by outside sources (i.e. foreign investments). But I still say wealth is a finite resource that simply gets redistributed. But the more I think about it, the more complicated it seems.
It seems to me that people live on average a better life than 200 years ago due not to an increase in the overall "supply of wealth" but due to the decreased value of most goods as a result of the industrial revolution and increased cheap imports. But I must admit, this is a perplexing question to me.
Can anyone adequately explain this issue to me, I would really appreciate it, like I said before, we (my friend and I) are biologists not economists and I think there is something we are just not getting.
I hope this does not seem like an inappropriate use of diary space, I think money and the economy is a primary issue in politics today, and when two highly educated individuals demonstrate this basic lack of understanding with regards to our financial system, I think it is a topic worth adddressing.