Simple Liberty  

 

     
   
     

Monetary Reform

Chapter 1

Wealth and Debt

Written by Darrell Anderson.

Get wealth and place, if possible with grace; if not, by any means get wealth and place.

Alexander Pope

People act out of self-interest. Self-interest is a natural part of human existence. All humans seek to improve their well-being. Some individuals might argue that humans also act out of charity or hatred. However, charity arguably is an act of self-interest — a desire in providing self-satisfaction and good feelings toward creating a better world to live in. Hatred too could be considered an act of self-interest — an act to improve the world (according to a particular worldview) by controlling or eliminating certain people.

All people satisfy material self-interests primarily by exchanging wealth for wealth. What is wealth?

Wealth: anything tangible derived from labor that satisfies individual happiness.

Wealth is a finite, positive physical quantity, always existing in the real world.[1] Wealth can be exchanged between people. Wealth is not defined by perceived exchange value — wealth is related to the physical world, exchange value is related to subjective human desires. Value is subjective and imaginary, wealth is objective and real.

Many individuals mistakenly believe there are two classes of wealth:

  1. Wealth created by labor and acquisition.
  2. Wealth created by nature.

Although an apple tree produces fruit, notice the apples provide no benefit to humans unless labor is used to harvest the fruit. The fruit might possess perceived value, but is not wealth.[2] Thus, the second category of wealth is a subset of the first and only category. Although natural resources contribute to wealth production, wealth cannot be created without converting energy into a usable form. At best, natural resources possess subjective value that might contribute to producing wealth, but are not wealth.

Because all humans are constrained by the time domain, exchange seldom occurs instantaneously. Typically, there is a time delay in all exchanges of wealth. These time delays create something called debt.

Debt arises when one individual does not immediately receive wealth in an exchange for wealth.

Debt: an unfinished exchange of wealth.

An unfinished exchange of wealth creates an absence of wealth. Therefore, debt is a negative quantity, always existing in the imaginary world.[3] Debt has no physical existence.[4] Through the concept of debt Hindus originated the concept of negative numbers.[5] Debt, as a concept, cannot be physically exchanged between people (although the things representing that debt can be exchanged). To claim a debt owed is to claim wealth not yet received.

Debt occurs frequently and as a natural result of the typical exchange process between people. Only seldom are some wealth-for-wealth (often called barter or direct trade) exchanges completed immediately. Although most people are familiar with the word barter, the term wealth-for-wealth provides a better reminder and description of what people exchange.

Some debts are commonly called expenses and are extinguished within a short period after receiving wealth. Some debts are extinguished in a matter of seconds or minutes, some debts are long-term and require several years to extinguish.[6] Rarely are wealth-for-wealth exchanges consummated immediately.

Various natural limits and restrictions imposed by the time domain means the concept of debt is unavoidable in any exchange system. Humans can act only sequentially and linearly and many natural limits, such as growing crops, cannot be rushed. Thus, human exchange systems create debt. Debt as a concept is neither “good” nor “bad,” but merely a fact of life based upon mutual exchange. Debt is not created through borrowing, but through unfinished exchanges of wealth.

Wealth is always subject to the physical laws described by physics. Debt is always subject to the abstract principles of mathematics. Wealth, existing in the unconditional physical realm, is always subject to decay, as described by the Second Law of Thermodynamics.[7] Debt, existing in the conditional metaphysical realm of ideas, is never subject to decay. Wealth can be consumed. Debt can live perpetually, can be extinguished, but never consumed.[8]

Wealth is a form of usable stored energy. Energy is the capacity to perform work and work is the process of applying physical force to move objects. Therefore, consuming wealth is a process of consuming energy. All wealth is intended to be consumed in one manner or another. Some consumption is immediate — such as eating food, while other consumption occurs more slowly — such as using an automobile or a house. The former is called perishable goods and the latter durable.[9] The former also can be called consumable wealth and the latter permanent wealth.[10] All wealth is subject to decay. Therefore, the word permanent is used only with respect to typical human life spans.

[Image: Author’s Pictorial Concept of Sustaining Energy Flows--The Social Concept of Property and Wealth. Important to the text.]

Figure 6

All people tend to pursue their happiness and seek to satisfy self-interests in an economical or efficient manner practical. People prefer to obtain wealth with the least amount of labor. Because every individual continually adjusts his or her definition of happiness, nobody can accumulate wealth in sufficient quantities to satisfy all future consumption. Foods have short shelf-lives. Likewise, clothing, cars, electricity, etc., cannot be stored forever. Needs and wants also change — after raising families large homes often are traded for smaller homes. Therefore, there are real-world natural limits to how much wealth can be stored for future consumption. Similarly, there are natural limits to how much wealth can be consumed in any period. You can wear only so many clothes and shoes, and eat only so much food.

Wealth is a function of the real, tangible, physical world. Wealth is a function of self-sufficiency or exchange. That is, wealth can exist without people interacting with one another. However, debt is a function only of exchange. Therefore, creating debt always is a function of social systems. Reconciling conflicts of debt is always a function of human legal systems.

Finis.

Terms of Use

Next: Chapter 2 — The Concept of Money

Table of Contents

Bibliography

Endnotes

[1] Barnard, Draining the Swamp, p. 28.

[2] Barnard, Draining the Swamp, p. 29.

[3] Barnard, Draining the Swamp, p. 28.

[4] Soddy, Wealth, Virtual wealth and Debt, p. 69.

[5] Soddy, Wealth, Virtual Wealth and Debt, p. 69.

[6] Gonczy and Schilling, Two Faces of Debt, p. 2.

[7] Soddy, Wealth, Virtual Wealth and Debt, p. 87.

[8] Soddy, Wealth, Virtual Wealth and Debt, pp. 69–71.

[9] Barnard, Draining the Swamp, p. 29.

[10] Soddy, Wealth, Virtual Wealth and Debt, p. 116.