Wealth

Let's go over this again. Wealth is not money in a mattress. Wealth is a function of value and is created through exchange.

I have five dollars in my pocket. You have an extra hibachi grill in a yard sale. I value the grill more than the five dollars. You value the five dollars more than your spare grill. There is an exchange. Both of us walk away thinking we got the better deal. Net value has increased in the exchange. Wealth has been created. Granted not great wealth, but take it up a notch.

I have $200,000 in the bank (I wish). You have a steady job and weary of paying rent. A loan is made, a lot is bought, a house is built, a mortgage is paid. Net value takes a jump. Wealth is created out of thin air, the breath it takes to make an agreement. This sort of thing goes on every day.

You have a million dollars in mutual funds bearing meager interest because the companies in the fund are not equally brilliant, nor their products uniformly desirable. I have an idea for a product that makes the smart phone obsolete. I exchange an interest in my idea for your million dollars. (Thank you.) A plant is built, people are hired, the product is sold, customers are clamoring to buy. Value is increasing geometrically on a broad scale. Great wealth is created.

This is how it works. This is the only way it works.

But, when taxes are exacted to pay for safety net programs, admirable though their aims, wealth is not created. Transfer is not exchange. Transfer systems work to reduce net value, and destroy wealth. Workers with skills are drawn to the safety net and production is lost. Investors with resources find their returns plundered and decline to engage in the marketplace (or worse, migrate to more favorable markets overseas). Unemployment insurance works to ensure unemployment. How does this come to be called a benefit?

The American economy is getting tired of foundering. As it makes gains in the coming weeks and months recovery will depend on whether our leaders step on the brake or the gas.