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Pondering the value of money in simple terms

The older I get, the more I doubt the wisdom of chasing rainbows.

In order to receive good wages, workers must be employed by companies making money. A company that is not making money goes out of business and the employees are then looking for work. If shareholders do not earn a return on their investment, they don’t invest. The balance required to pay employees a fair wage and provide a fair return to the investors is what keeps our capitalist economy afloat. No businesses equals no work. Equally, no workers equals no businesses.

Surely the available profit has to be shared down the line of companies too. Company A wants to buy goods from Company B. Company B wants the business, but has wages to pay and shareholders to satisfy. So does Company A, so Company A pushes Company B for a lower price. And so on down the line to the bottom of the supply food change. If wages are too high and the companies can’t make enough money, as we have seen the companies disappear from our shores. I am NOT getting into the debate of what is “enough”, I am more concerned about everyone’s desire to see the numbers grow. Companies want their revenue to grow, their profits to grow. Employees want their wages to grow (yes, I’m no exception).  Prices go up, wage increases disappear into increased prices and around and around we go.

Can the numbers keep growing forever with no real change in value? Let us look at a house for example. A house bought in say 1980 for $90,000 was worth $1,500,000 not too many years later. What about that house had actually changed? Nothing. It had no extra bedrooms or bathrooms, it did not miraculously move closer to the city or become a beachfront abode. What justified the $1,410,000 increase in monetary value? Is the resident any happier?

What is so different about the litre of milk I buy today against the litre of milk I bought in 1960? The packaging and the price. The milk is pretty much still, well, milk.

We like our public education, public medicine and pensions. These as we know come out of taxes. We like our roads in good repair. If our government can’t collect enough taxes, they can’t pay for all the things we want them to pay for. We have the age old argument about the national budget being in surplus or deficit. Surplus is mandatory, according to our current government. A surplus is good, of course. Saving for the future is a good thing. Sometimes though, we need to invest in the future and that may require borrowing. Just like we borrow from the bank to buy a house.

When I was younger, I thought the value of my house increasing was a wonderful thing. Now I am older I am starting to wonder. We hear of the housing market being overvalued and an expectation prices will drop – dramatically. We see manufacturing disappearing from our shores because the goods can be manufactured elsewhere much cheaper.

I was chatting to David Spencer on Twitter last night and he made this comment.

Supply and demand, taxes, rich and poor, middle class, various economic theories: yet we all, in the end, can’t take any of the money with us.

I wonder, are we really just chasing rainbows? Do we make it all too complicated? Look at the Global Financial Crisis, or the Great Depression. We buy and sell futures, money can just be printed on demand. I’m just pondering.

What about you?

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10 comments on “Pondering the value of money in simple terms

  1. […] days. Collectivism ensures the elderly are cared for. Individualism gives us…..more money? Individualism gives us innovation and progress that we may or may not need as a species, but it […]

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  2. When do we stop chasing things ??

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  3. Nice little post Robyn,
    Perhaps readers can help me, I’m trying to recall the rules that I am certain once applied to investment properties used as rentals. I believe there was once a formula that controlled the amount of rent charged in direct relation to the mortgage taken out on any such property. A profit % if you like.

    Because if im right, renting only became more expensive than owning after this control was lifted & landlords began screwing people for all they could thus causing price increases the average person earning under 45k can still pay, but only if they like living on noodles & cocktail frankfurters while eating in the dark under a doona because the heats been cut off.

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  4. Reblogged this on Curiosity and Challenge and commented:
    Excellent points to ponder.

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  5. used to work similarly myself did so for 40 years,when hit a brick wall suffered chronic major depression along with some other ailments that was the end of my working life.did not have enough to retire on at that time but had no choice been broke and on pension since.would i do it again? yes loved my work.

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    • Which means the money wasn’t important to you. The work was your motivation.

      Re your major depression: have you looked at the HBDI? It came out of work related depression. Very interesting it is.

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  6. Kaye posted the following comment on my Facebook page in response to this article and has granted permission for me to reproduce it here.

    *******

    I have been pondering the same issue. I’m between jobs at the moment. I’ve been a high flyer for quite a while now and if I’m not doing ten hour days, rushing from meeting to meeting, working in the Qantas Club or talking on the hands-free in my car to maximise my output then I feel like I’m not doing enough. But how much is enough? I’ve been wondering about just how much I need to live on.

    I’ve been wondering even more about how much impact my lifestyle has on the planet. I don’t enjoy particularly good health, I’ve been keeping up this pace since I started work when I was 15 and now I’m thinking that perhaps I’m doing it all wrong. The problem is that I want to see the world, I want to leave my grandchildren something to help them along, I want to be “comfortable” and I definitely want to keep my private health insurance.

    So how much is enough? And what do I have to do to reach it?

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