The TMG First Law of Money
76Respect The Law!!
I coined the TMG First law of money in my hub about Reverse Mortgages so I thought I would expand upon the comment by writing a whole hub on the subject. Here is the basic law:
Wealth is a fixed value there is a finite amount in the world it cannot be created nor destroyed only transferred from one owner to the next!
I have read a lot on economics and economic theory, all of them without exception seek to overcomplicate what is a very simple concept, that is almost instinctively understood by all humans.
The Real Law Giver!!
Imitation Theorists
What economic theorists (economic theories aren’t really scientific they just use the word to give the sound of authority) attempt to do is make something simple sound way complicated so most people will not bother.
Trust me when I say this, "Tthat is not in the best interest of the average guy in the trenches." This is by design. If the average guy isn’t aware of what is going on and thinks it is to complicated he will not put much effort into learning and that is where the devil is.
By not making the effort the average man now becomes a child in hands of the economic parents. He is forced to trust that these experts know what they are doing and they are not trying to enslave and steal all that he has.
So let’s tear into it, why do I say that all wealth comes from the land. Well to me this is easy: food. The only place to get food is from the ground. I know there are some fancy labs out there trying to do it different, but they cannot escape physics. The matter must come from somewhere and that somewhere is the ground.
So, the first essential element of wealth is food. If you do a quick search of the massive fortunes amassed by individuals you will find that food production, distribution and sales have created half of those fortunes. This is no accident it is the one product people buy during the worst of economic times.
So, what about the rest of those fortunes, well the next group on the list are the shelter group, again, you must own the land to build the hotel or skyscraper. So, after food it looks like the shelter crowd does pretty well.
Lastly, the Industrialist fortunes, while not as large in number their dollar amounts are quite impressive. These guys make their fortunes from transforming the minerals in the ground into the nifty little gadgets we all must have. Again, you have to get the minerals and elements somewhere and that somewhere is the ground.
Some Deep Reading!!!!
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Naked Economics: Undressing the Dismal Science
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Economics (McGraw-Hill Economics)
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Economics
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Where I diverge!!!
Where my simple theory conflicts with many of the more complex theories is the role of labor. The standard line in any 100 series college class will tell you that wealth is the combination of the land plus the value added by the labor performed.
While in its literal since it is true that labor adds value, but this value is not fixed and is undeterminable, and in the root and elementary level is fickle depending on the economic climate. So with that said I discount the labor component in wealth and use this quick and common example:
When times are tough and you are selling your jewelry to the pawn shop or cash for gold, does the guy say wow what great workmanship, or does he weigh it for the gold content and quote you a price based on that.
Yep that’s right the only thing the actual market cares about is the content of the land in your priceless heirloom. That is the common Ownership Fallacy the belief that the end consumer is the market.
I contend the actual market is between the owners of the land, the owners of the means of production, and the financial institutions that support them.
The TMG First Law of Money in the News
- Nation's culture wars trumped by economics and the role of governmentSeattle Times5 hours ago
The fading year's quiet story, writes columnist E.J. Dionne Jr., is that other issues — notably economics and the role of government — trumped culture and religion in the public square. The culture wars went into recession along with the economy.
- Henricksen receives economicsThe Record-Courier17 hours ago
Former Gardnerville resident and 1999 Douglas High School graduate Steven Henricksen graduated with merit from the University of Glasgow with a masters degree in economics. Henricksen is a 2004 graduate of the University of Nevada, Reno. He is the son of Christine and the late Erle Henricksen of Gardnerville.
- Economics professor named Associate Dean for Extension in College of Agriculture, Life SciencesClarinda Herald-Journal1 second ago
John Lawrence has been named the associate dean of extension and outreach for Iowa State University's College of Agriculture and Life Sciences and the director of ISU Extension to Agriculture and Natural Resources.
The Law Strikes Twice!!!
This lends me to the TMG Second Law of Money:
Unless you bought the land, or financed the means of production you are not an investor but a speculator!
What does this mean? Well, no matter what you think or what our system tells you or your Financial Advisor sells you. If you are not on the list that JP Morgan calls when they take a company public you are not investor.
Repeat, your bank account, your brokerage account, your IRA, nor your 401k make you an investor. Sadly, only a speculator you are.
My, social studies in fifth grade explained this very well, imagine my surprise when my children were in school, and they had the same book, only minus the explanation of what a speculator and an investor is.
Anyway, I digress, I believe, that most owners of the means of production view labor as a part of that machine whether it is done by a human or a machine, hence the term human capital. So, given the very organic nature of the human species it is very reasonable to see them as only an extension of the land in the form of the machine, and therefore not a separate component to be added in but a homogenous fact. This is demonstrated in the ease of interchange between man and machine on the modern assembly line. (Or the not so modern substitution of the Ox and the cow, it is only by our ego do we see ourselves separate from all these other organic machines)
This is why Marxism is no different than capitalism; whether by a group of private individuals or by a group of elite politicians, the control of wealth and production are always in the hands of the very select few. In the transition only the paperwork dictating this control changes, not the wealth behind it. I.E Wealth is not created nor destroyed only transferred to new owners.
This Transfer can happen simply through sell or trade, but most often it is done through deception, legislation, and or Force (Think Eminent Domain, or all out war).
The last means of transfer war is the only means that the powers that have been and always will be have ever been thwarted. But they do not rest long as soon as they are beaten back they pick themselves up change their strategy and get back to work.
The best example of this is in the United States of America, I challenge you to find someone that does not think the Declaration of Independence was about personal freedom and liberties. That is the very thought process Capitalism likes. Business promotes the greedy self interest view of history, but it is not correct.
The Declaration of Independence was a financial instrument. It declared Independence from all powers of Finance. Whether public or private from Europe, the real oppressor of the NewRepublic was the Central Bank of England and its private money interests that wanted to charge interest and fees on everything the colonist did. It was this system they declared independence from. Find that in a text book today!!
Wealth is a fixed value there is a finite amount in the world it cannot be created nor destroyed only transferred from one owner to the next!
It is time we transferred some of it back to its rightful owners. We must do away with this system of monetized debt that enslaves us. We must return to the Constitutional concept of free currency.
TMG
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Comments
Dodger,
Thank you for the compliment.
TMG
Good hub, Interesting concepts.
So were the caveman as wealthy as we are?
Keep on Hubbing!
Eovery,
Absolutely, they on average were more wealthy than our present generation. Simply due to population. They had the fruits of the whole thing to themselves.
Good comment
TMG
You cut through so intelligently to the quick! Great hub as always - and I've bookmarked it to come back later and read all the links. It's universal wouldn't you say - and has been throughout history - never mind what label an economic system gives itself, it's actually about the land and all that's in it.
Thank you Shalini,
Those links are an excellent tutorial on the workings economics.
Thank you
TMG
You're singing my song TMG. We say the same things in slightly different words. This is excellent.
I'll be checking those links now. I suspect I'll be adding them to my favorites.
Good stuff, thanks!
I would argue some minor points about Marx. To my mind, Marx is sorely under-appreciated and wrongly damned as a modern philosopher. He is wrongly and retroactively judged based on the communist regimes of Eastern Europe--he wasn't even alive for that. He predates those regimes. Marx was more of a social philosopher than an economist. He was especially concerned about the "alienation of labor"--meaning he was distressed about what you point out quite rightly here, that the owners of the means of production and the land do not distinguish between the machine and the laborer. For that reason, the owners of the means of production own the laborer too. Because his labor is not his own, he becomes ALIENATED from it,from his own work, as well as from the result, and as well as from the land itself.
I think this observation was Marx's main contribution to social philosophy. He made the observation at the dawn of the Industrial Revolution, but his remarks are as relevant today as they were back then. Sadly, few people are aware of them because they're too busy demonizing the guy for creating Soviet Russia, which he did not do. Marx thought that work was central to life, and that when you take the soul out of work and divorce it from any intrinsic value it might have so it can be possessed by a third party, you destroy the individual working man and reduce his quality of life drastically. Simply put Marx was saying that working for someone else sucks, it bleeds life of all meaning and satisfaction, and the farther away from the worker that someone else is, that owner, the more it sucks and the less life means.
I think over the coming years land and real stuff will come to be worth more than money, and as people see that they are, the world will reset. I hope.
Great hub as always, thanks for sharing your thoughts. You're always a great read!
I like this a lot, and great links for future reading when I have the time!
Thanks CWB,
We take a different path but I know we are saying the same thing. I have read all of your work. In fact this hub was inspired by your last hub with the quote from Thomas Jefferson. Thank you.
TMG
Pam,
Many apologies Pam, my comment was about Marxism as practiced. Marxism as written by Marx is very Ideal, and would make a nice utopiun reality.
However, Stalin turned it into the same ol Fascism that takes over in every hierarchel arranged society, where it becomes about the Nation and the individual is trampled and lost.
So, no we are not arguing on Marx, as I agree with you completely. My intent was in how it is implemented.
Also, I would add that he has been used quite succesfully in the Hegellian Dialactic sense as a divide and conquer point for all of the working class.
As always thank you so much for your comment as I value your thoughts and opinions quite highly.
TMG
Oh, I think too damn much actually. Pretty soon here I'm going to have to stop thinking and learn to skin squirrels if things get too much worse. I would have no trouble killing and feathering a bird or cleaning a fish--I've done those things--but if I had to kill and skin animals my diet would have a lot more vegetables in it. Lol! Lucky for me, Bill has no problem with skinning critters and neither does my son in law, so maybe I'll survive to blather another day! (It's lookin' dicey though!)
Like what you wrote! Will keep reading and learning!
Pam,
No worries, I think you will take right to skinning animals, just think of them as CEO's and you should have no problems. :-)
Greg,
Thank you for the comment and the read.
TMG
Very interesting hub. I don't know that we aren't seeing some destruction of wealth, however, because one additional component to wealth is the velocity of dollar turnover, which is tanking. That seems to be taking away wealth by the truckload.
I don't think so, because the dollar is just a medium of exchange and therefore cannot represent actual wealth. I think what we are seeing is a perceived loss of wealth so that sellers devalue their property value in terms of dollars therefore making it very prime pickings for the large consolidators that created this chaos in the first place.
It is just a land grab, nothing more nothing less. Now that I think about it you have enlightened me to the confusion.
I think by your statement you and most people are equating wealth to value. The wealth remains unchanged, but the value in dollars is what is disappearing.
TMG
But it doesn't look like a land grab. It looks like a rebellion against the land grab. Look at all the people who aren't paying their mortgages or credit cards. I can't imagine that this is adding to the wealth of the banks. Sure there may be a consolidation of banks, but that is a risky game, since the banks may tank before they become dominant. Just wondering your thoughts on that.
And it isn't like there isn't more wealth created now than, say, in the dark ages.
Not paying your mortgage makes it a land grab. Not paying your credit card is a rebellion, but the loses on cc don't put a dent into the wealth aquired in the morgage meltdown.
TMG
Well, look at it this way. If banks wanted houses why wouldn't they lend aggressively when prices are going down, as they would likely get the house back as borrowers became underwater?
It appears that banks are afraid to lend under those circumstances.
It doesn't work that way, when they lend the prices go up. So if they lended agressively when prices went down then the price wouldn't go down. They withhold, such as now and bring the price down. Then do all the first time homebuyer incentive in order to bring in new money. Look at the perks the stimlulus plan gives to new buyers nothing for old. The banks determine the prices of the houses not the other way around simple supply and demand.
TMG
I can see that, but part of the withholding has to do with capital requirements. So what you are saying is that the federal reserve, or central bank has the money so lend but is artificially starving the big banks, seeking money from the taxpayer?
That would fit into the warnings of Marx, that governments are pawns of the worldwide rich.
Also, moneyguy what is this land to wealth relationship regarding commercial real estate? I mean, banks get money from big retail. Big retail is in trouble, which could cause blight and a destruction of the value of real estate in malls, right?
One final point before your comment. It is my view that real estate, at least residential real estate, has nothing to do with production, capital, and labor. If a bank owned all the residential real estate in the world they would still be void of any production capacity. I think it is as useless to production as wilderness, or unused forest. Many who talk about land and capital being separate are careful to make that distinction.
Again, as Roubini says, the banks are seriously insolvent, and there is not enough capital to bail them out. In fact, the average house has gone from 500k average to 350k and still needs to go to 200k. This is a tremendous pressure on the banks capital structure. They are insolvent.
This is not smoke and mirrors, and is a real decline. Banks are not lending because they are afraid to loan and they are insolvent. I do not believe it is a conspiracy to not lend. I believe that the conspiracy was the pumping of the economy under Bush.
Yet another great Hub, TMG.
As you know, I come from the same direction as you on a lot of things. Wealth is such a relative term that it is practically meaningless. Some weeks, I am lucky to scrape $100. However, with few outgoings, no rent or mortgage, and making do, we are better off than many people who earn thousands per week.
How do we determine wealth? We have the sun (most of the year!), land to grow food, great people around us, no stress, and lots of ancient piles of rocks for me to go and look at. That, coupled with adaptability and innovation, constitutes wealth.
As for the cost of labour - we barter around here a lot. I fixed my friend's computer and he owns a restaurant, so cooked us a free meal. No small pieces of paper changed hands, and everybody was happy! No attempt to haggle or seek a better deal, just two friends helping each other out.
A little late now, so I will read the links tomorrow.
Sorry, Moneyguy, that house price drop in my last post was for California.
TMG, Great Job and well thought out. Natural resources have always been the key and the owners of the land own the access to the resources. You can also look through history and find examples of those on the left and the right who once achieving power changed their tune. Absolute power corrupts absolutely. I will have to check out your links. I always enjoy a discussion with a mind that is not tied to convention of either side.
Bgamall,
You cover a lot in your comments, I like that you are well read and put thought into this. So hopefully I can clarify a few things to anyone that has the patience to read through all these comments. Thank you all for commenting.
From your first Point the Federal Reserve and the big banks are essentially one entity. It is a weird Push Pull system we have. The Fed in order to raise Capital for our country must first sell securities (Debt instruments) this is where our national debt comes from. Once sold they now credit the account with that amount minus the discount (The Federal Reserve must make a profit, even though technically it is a non profit institution it must pay all of its expenses to include fat salaries and bonuses). If there is any left over then it is given to the treasury, once the debt is sold it may now be monetized into the form of Dollar bills in whatever denomination and is then loaned at an interest rate (The Discount rate) to member banks (Any bank or credit union or S&L that is not private) most banks the average folks would use or the ones you here about in the news.
Now this rate is set by the FOMC which the Chairman of the Federal Reserve board determines based on what it thinks the needs of the country are. They look at two factors inflation and the Multiplier effect. We use a Fractional Reserve system that says a bank can lend 100 dollars for every dollar it has on deposit with the Fed. So the multiplier is this: They give you a hundred thousand to buy a house then the seller puts the money in his bank and now his bank can lend a million and so on and so on, so a little bit of money lent gets a lot of circulation bang for the buck (pun intended).
http://en.wikipedia.org/wiki/Federal_Reserve_Syste
Now as for Big retail where the banks get hurt by that slow down is particularly in their revolving lines of credit and their LOC's (Letters of credits to the foreign manufactures of our goods) As far as the real estate side of it, it is the same game. Although the banks do not expose themselves to as much risk by requiring larger down payments and higher interest rates. Since there is no Fannie or Freddie backing or dictating rules to them they can pretty much insure they make a shit ton of money off of commercial real estate. Trust me they do not lose much on this deal if you would like I can write a hub on Commercial loans and how the bank profits on them to show that this is smoke and mirrors.
As for residential being separate from the means of production, that is in the context of the buyer of the home for his personal residence. Most people quote Adam Smith (in fact my first link on how capitalism works takes the reader through why a home is not a part of production in this sense) however, from the bank the owners perspective it is very productive and has been a huge boon and profit to the banking industry. As the owners of 95% of residential property they have taken most of the saving and wealth of the common citizen. By refusing to lend (if you read my wiki link above you will know that they have the money and the ability to lend the money without fear) they decline the value of the house erasing all the down payment money and all the interest payments now they take the house with no outlay of cash what so ever and now resale the asset either to a new buyer collecting another down payment or to the taxpayer as in the past and present if they found they got a little to greedy.
As for the house prices you listed I know those numbers well as I am currently buying foreclosure in California at this moment. My first taste of money came from buying foreclosures from the Resolution Trust Corporation in the early 90 same game different name.
TMG
What economic theorists (economic theories aren’t really scientific they just use the word to give the sound of authority) attempt to do is make something simple sound way complicated so most people will not bother.
This is very true for health as well. The Pharmaceutical industry has made illness and disease into a complicated and dangerous affair rather than what it is, simply all disease is based on the same simple mechanisms; disease cannot live in an oxygen rich environment, or a high frequency environment or the correct pH environment. In other words we create in our bodies a low oxygen, low frequency and high acid environment and then wonder why we are sick. And then we have been lead to believe that taking a toxic man-made substance that would make a well man sick is going to heal us. It is all part of the greed and profit mongering. It may hide symptoms but can never heal. Why are so many medications needed to be taken for the rest of your life? Is that healing or a way to big profits?
I like Sufidreamers attitude.
Your hub is very well written! I had read it 3 times before I understand it, now I think you understand it and I am very agree with your writings.
Ciao Angelo
We can certainly see that the capitalists are wanting to steal from the treasury to bail out the banks, yet they are the same ones who allowed off balance banking which lead to liar loans and a fleecing of the middle class.
It is my view that the capitalist international bankers want to stop any haircut of the bank corporate bonds which could result in their derivative losses. Therefore, the bankers are really acting like communists, stealing from the treasury. Now the Chinese leader is worried about his bonds, and realizes that the US cannot just keep allowing the banks to raid our treasury.
It will be interesting to see how this battle ends.
bgamall,
Nothing would make them happier than to see it end in a war with China, China is the only country not in the pocket of International finance. A war would force them to borrow like everyone else has, and that would put them in their pockets at last. Something the world of Finance has dreamed off since before the Boxer Rebellion.
TMG
Thanx TMG! I would love to share your concepts with everyone in the hood. Then maybe the proliferation on payday loans, pawn shops, and rent 2 own hovels would ebb. It never ceases 2 amaze me how the majority of businesses in the hood are owned by non-hood dwellers. Get a clue. Many of the folks who do understand money are engaged in illegal activity 2 acquire it, then end up eliminated from the equation because they get locked up. I love how you break it all down to laymans terms easy reading. To think we all could've ended up nuked over a financial system arguement, I guess weve swapped that for a religious argument and may still end up nuking it out...
Putting physics into money...... hope won't be phony :)
I wonder what Newton would have done if a coin had dropped on his head instead of an apple.... any answers ....
Your hubs are helping me sort so many things out I have read portions of your hubs out to my son and I have told my husband about them and both are going to read your hubs for themselves as their interest has been caught by what I have told them.
Being the owner of the land does not make you wealthy. It is the person with the means of production and the financial institution who is made wealthy by the sale of the land.
My family has always been the low man on the totem pole. Let's just say we produced the raw milk the middle man bought the raw milk, pasturized the milk then sold the milk for profit to the vendor who in return made a huge profit. My family only made enough to pay the bills. Now the land that once was a dairy has been for sale for over ten years and still no buyer. We have had three contracts on the land and they all backed out at the end of the feasability.
We signed a contract two years ago prior to the recession. We were set to close at the end of 2008 and then...recession. The contract has been amended with a rolling closing. That means we do not make money until the middle man sells off our property piece by piece. How does this help me pay my bills in the meantime? Oh, that's right I work for the bank that is stealing everyone's money. Everyone needs a job at some point.
artfuldodger says:
10 months ago
Nice Hub. You're definitely on my short list of "must read" hub authors. Keep it up.