Fundamental Wealth

2nix freedigitalphotos lightbulbQuotes explaining fundamental wealth — or real wealth.

“The net acquisition of all securities in the economy is always precisely zero, even though the gross issuance of securities can be many times the amount of underlying saving”

“When one nets out all the assets and liabilities in the economy, the only thing that is left – the true basis of a society’s net worth – is the stock of real investment that it has accumulated as a result of prior saving, and its unused endowment of resources.”

“True wealth is embodied in the capacity to produce (productive capital, stored resources, infrastructure, knowledge)”

– John P. Hussman, Ph.D. (July 4, 2016 – Weekly Market Comment)

“Real wealth, of course, consists in what is produced and consumed: the food we eat, the clothes we wear, the houses we live in.  It is railways and roads and motor cars; ships and planes and factories; schools and churches and theaters; pianos, paintings and books.  Yet so powerful is the verbal ambiguity that confuses money with wealth, that even those who at times recognize the confusion will slide back into it in the course of their reasoning.  Each man sees that if he personally had more money he could buy more things from others.  If he had twice as much money he could buy twice as many things; if he had three times as much money he would be “worth” three times as much.  And to many the conclusion seems obvious that if the government merely issued more money and distributed it to everybody, we should all be that much richer.” – Henry Hazlitt (Economics in One Lesson)

The common misunderstanding of money, alluded to in this quote, is addressed in the Third Wave Finance article The Questionable State — and Abusive Use — of Economics.  More money does not mean more wealth; money is only an exchange between real wealth items.