moneyFYI
Financial Freedom Is Merely Organized Common Sense
Using The Big Picture of the Economy
The first question that comes up is “What do you mean by money?”
For this purpose we’ll use M2. That is M1, currency plus chequing account, and add to that easily converted other deposits.
Using M2, there is about $40 trillion in the United States. That’s about 2 years worth of GDP. World GDP at purchasing power parity is more than $125 trillion. We could guess the total world currency and usable liquid deposits is in the $250 trillion range.
Total Assets
The number here is a little misleading if taken at first glance. The gross number is around 1.5 Quadrillion dollars. But the equity value is that is about $510 trillion. we can infer from that there is about $1 quadrillion in debt. That amount shows up as an asset somewhere else and that’s why the total value is much greater than equity
What’s all that mean?
It matters to policy makers and economists, but it probably won’t make your monthly budget balance. What you do find out is the billionaires are a bit less formidable. All of them together own about $13 Trillion – about a fortieth of the world’s net worth. It is concentrated though.
If you owe 2/3 of what you own, you’re about the average of people in the world. I doubt that’s a good thing, but people are at different places in their life and such things happen. Being out of debt is a mind calming situation. Think it through carefully.
Money is only worth something as long as people believe. A bit like Peter Pan. How much would a $20 bill be worth if no one believed it was money. Fiat money, money because someone says it is money, is the normal condition. Do you think it will last? There is not enough gold and silver to replace the fiat money, and eventually people will want to do so. They don’t trust governments any more and that trust is necessary to make fiat currencies work. Learn about crypto currencies and pay attention to how they evolve. Something else may come along in the future.
People pay attention to micro-economics not macro-economics. That’s as it should be. It doesn’t mean you can safely ignore the bigger picture. As with most things in life, you’ll find the changes you need to make in your life first in the big picture. You can anticipate better when you understand what is going on at that level. For example, “How much do governments spend of the total wealth of the nation?” That is approaching and may have passed 50% of GDP.
A book that informed my early view of economics and the world is “How the World Works” By Joel Wanniski. The point in it was as government stake more the economy does more poorly. High tax rates correlate with lower economic performance. Deficits are just taxes they haven’t collected yet. Help politicians to understand the idea of living within their means.
The bit to take away
Money has a mystique for many, but is really less complicated than people think. it is fundamentally objective. You can understand it if you try a bit.
Use big picture data and how it is changing to help you anticipate how things are likely to become. Anticipation is the key to successful control of your life.
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I build strategic, fact-based estate and income plans. The plans identify alternate ways and alternate timing to achieve both spending and estate distribution goals. In the past I have been a planner with a large insurance, employee benefits, and investment agency, a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business. I have appeared on more than 100 television shows on financial planning, have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, and Banks – from CIBC to the Business Development Bank.
Be in touch at 705-927-4770 or by email to don@moneyfyi.com
moneyFYI 