Are the Wealthy Limiting Your Ability to Become Rich?

Where did Money come from? And do only the Wealthy have access to the limited supply?

This post is a departure from the normal problem posts to more of an economics discussion. I think it helps at times to get the big picture when it comes to money. So join me as we think about some bigger picture ideas. Just remember, I’m an engineer not an economist. So I tend to simplify sometimes. . .

Have you ever wondered how much money there is? I know, you may not care. But I think about things like this at times. Also, where does money come from? Whether you know it or not the answer to these questions has certainly influenced your attitude towards wealthy people, poor people, and money in general.

So think about it, where does money originate? And how much money is there?

How did Money Originate (Produce Illustration)?

Using money as we do today is form of barter. You trade money for goods or services. But it goes deeper than that. Let me explain.

Imagine before money existed, that you had a garden that produced vegetables. At first you can only feed your family with the yield from your modest garden. But you work at it, and grow it and get better and better yields. Eventually you become more and more efficient, so that you have more produce than your family could eat or preserve.extra produce for sale

To keep it from going to waste, you start to offer it to others in exchange for something you need. Your neighbor is good at building / fixing things. So you strike a deal. He replaces your roof in exchange for 50 pounds of fresh vegetables. So you could say your new roof is worth 50 pounds of vegetables.

Then you want to buy a horse to help in your now massive garden, and to haul your produce around. So you go to your other friend who raises horses. He offers to give you a horse for 20 pounds of your fresh produce. So a horse is worth 20 pounds of vegetables.

Now, the guy who replaced your roof decides that he also wants a horse to help him haul his tools and materials around. We’ve already established that a horse is worth 20 pounds of vegetables. But the roofer doesn’t have as big of a garden as you do, so how can he get a horse to help his business? He could offer to build something for the horse-guy, but how does he value his service fairly, and how does the horse-guy know he didn’t get ripped off?

Government Solves the Produce Problem (Crazy, I know)

The government steps in to fix the problem (they did actually solve problems once – perhaps they still do?), and says, “Look, we’ll set up an independent system so that we all work on the same scale. We’ll make a metal coin that’s worth one pound of vegetables. And because we’re the government, we’ll guarantee that everyone will accept those coins in exchange for any goods or services.”

So a horse is now worth 20 coins, a new roof is worth 50 coins, and a pound of fresh produce is worth one coin.

All the different businesses operate with the same coins, and transactions between businesses are much easier to understand. The only difficulty is deciding how to value the different goods and services.

So the government keeps the currency (coins) valid and the entire system working. They can also inject coins into the economy as a way to increase the supply. And of course it’s all backed by produce and the government. But there is another way to “grow” the supply as well.

Banks Create Money with Interest.

This is where banks come in. Imagine that you (the farmer) start to sell so much produce that you don’t want to keep all those coins in your house. You take them to a bank to secure them for you. They have better security, and they are backed by the government. So all your extra coins are now stored in the bank.

Then suppose that your other neighbor decides to start a new masonry business. But he doesn’t have the coins to buy his tools or a horse to help him get around and haul equipment. So he goes to the bank and they give him some of your coins as a loan. They agree that for every 10 coins the bank provides, he will give them 11 coins later.

So the banks are growing the supply of coins with interest. You still have your original coins (in the bank), but now your neighbor can grow his masonry business as well. So once the mason pays his loan, the bank will have an extra coin to lend to someone else.

Imagine this on a large enough scale, with government regulations to protect the lenders and the borrowers, and this is basically where we are today. See, I told you I like to simplify things.

Money or currency earlier in our history was based on the amount of gold we had. This is no longer true. We still have gold, but not enough for all the money out there. So our currency in its simplest form is only valuable because we give it value. Or more specifically, the governments give it value by standing behind it.

I know it’s more complicated than that, but like I said, I’m an engineer – not a real economist.

So how much money is there?

There is no limit to the amount of money available. In fact, the supply is always increasing, because of the banks and the government backing. And because of those creative entrepreneurs who are injecting new products and ideas into the market.What limits your ability to become rich?

Based on this, I believe that anybody can always make more money. Even if the billionaires become trillionaires, you can always make more too. You’re only limited by your ambition, perseverance, and choices.

And you should certainly try to optimize your own cash flow and savings. Save more and spend less. Just because there is an endless supply of money available, that doesn’t excuse bad decisions or spending with abandon.

But it does mean that “it’s only money.” And if you have some skills or creative ideas, you can always make more. Your ability to make more money is not restricted by other wealthy businessmen, unless you are trying to sell the same things that they do.

You can always make more money. You are limited only by YOU. Click To Tweet

The Wealthy didn’t “take” to become wealthy.

The wealth in the bank accounts of men like Jeff Bezos, Bill Gates, and Mark Zuckerberg, didn’t come at your expense. Sure you might have given them money for a service or product. I did. I’m typing this right now using Microsoft Windows on a laptop purchased from Amazon.com. When this post goes live, I’ll publish it to Facebook – and other places. Okay, I might not have given Zuckerberg any money.

But my point is, they earned their money with novel, smart ideas and products. Then they took their profits and invested in other ideas and products that made them more money. And when those ideas become popular, they took their extra money and invested in other ideas and products.

All without ever affecting you. Unless of course you work for a company they’ve invested in. Then they’ve actually helped you indirectly by believing in your company enough to put their money behind you. And help you grow your business.

Of course I’m talking about the stock market. And just like the wealthy, you can invest in companies you believe in too. Or, you can have a great idea and present it to the market. Like the farmer in the original illustration who became the benchmark (one pound of produce) for the first coin. If your idea becomes popular, you’ll become wealthy.

If and when you become wealthy, you should be giving back to those in need. Not because “we need to all share”, but because it might just be the boost they need to get over the hump. You never know who you’ll end up helping.

Conclusions

So what about you? Are you using stock market to your advantage, or are you still complaining about the others who are?

There is always more money to be made. Just because someone “made it”, doesn’t mean that you can’t too. There is more money in circulation today than there ever was before. Sure, some things cost more due to inflation, but wealth has grown even more.

It’s not luck, and you are limited by you. Get after it, and start winning.

Are you a shareholder? And are you working a plan to succeed? 

Let me know in the comments, and as always, I thank you for reading and sharing.

-Chris

 

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Posted in Personal Finance.

8 Comments

  1. Believe or not, I found this post very interesting. Great job, honey. Now let’s go out and make some money to pay off our mortgage. I guess that means I need to start working. Because money doesn’t come from trees…or does it?
    Kate

  2. Loved this! I find issue with people who believe that because the “rich are getting richer and poor getting poorer” that doesn’t mean there isn’t plenty of opportunities out there for you to be rich. There are really limitless possibilities out there and it’s up to each person to educate themselves on how to find it.

    • Right! Someone else’s success doesn’t detract from your potential success. But we have to go and do it. No one else will make it happen for you. Thanks for the comment.😀

  3. Great illustrations, makes me want to go out and tend a garden even!

    In all seriousness though, I couldn’t agree more with this statement: “you are only limited by you”

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