What is wealth? Or being “wealthy?” Is it a car? A panoramic TV? A Droid 10, or whatever version is currently being peddled?
For the better part of three decades, we’ve increasingly thought of wealth as being what we own. What we buy. Possesions. Those shiny batons we hope to pass on to our young in this perpetual race to beat the Joneses.
But what if that really isn’t wealth at all?
The gap between the rich and the rest of us is greater than ever. We hear it all the time: fewer and fewer people own more and more. Does that mean the top 1% is busily filling up personal warehouses with big screen TVs, high-end furniture and iPods?
What is it that they actually own?
What they own more of than the rest of us is…the ability to own. Wealth for the truly wealthy is not really the possessions they’ve purchased, but it is the reserve of cash, savings, bonds, currencies, gold, stocks, properties and the trust-funds they so easily command. They measure their wealth by what they are able to buy, if and when they want to buy it. It’s the power of their financial leverage that matters. Now, that’s real wealth.
Unfortunately, the rest of us have been suckered into thinking that owning things equals wealth. We consume. We buy. We look at those things as tangible evidence that we are doing well…that we have wealth. And, in these tough economic times, we are constantly pushed into believing the idea that buying things is going to help the economy. Any rise in “consumer confidence” starts a mini-party on Wall Street.
But isn’t that what got us into this mess in the first place?
You see, consumption is not wealth. It is the removal of wealth. In this post-industrial, globalized and service-heavy economy, buying things is the quickest way to lose what little real wealth we have. Wall Street rejoices when we spend because they get richer. We get poorer. The gap grows, and so does their leverage.
Think about it. What happens the moment you drive that $45k luxury SUV off the lot? Or open that box and pull out a computer or multi-platform cell phone or iPod?
Depreciation. It loses value. Immediately.
In fact, electronic gadgets drain wealth better that just about anything…ever. Not only do you get the usual consumer product value drop-off from simply opening the box, but by the time you get to Best Buy to even look at the box, there are three more future versions already in the pipeline. Any computer or phone you buy is obsolete before you even buy it. Obsolete before the product was even launched.
When was the last time you sold your used cell phone? Or iPod? Right, there is no market because there is no value.
GM’s infamous “planned obsolescence” of the 70s and 80s cannot hold a candle to Apple’s worm-turning product development or the harsh, global enforcement of Moore’s Law.
During our bizarre adventure in BubbaLand, the forces of wealth suction were unleashed. The internet economy and the 401k boom fed off of and capitalized on the worries of Baby Boomers who kept on hearing that Social Security was in crisis. It wasn’t. Oh well. Who knew? Uh…some Wall Streeters did, and they coaxed a ton of Middle Class money into “mutual funded” internet boondoggles using dreams of wealthy retirement as bait. They made their money on the way up and then on the crash.
But the forces of wealth suction also fed off a Reagan Era desire to conspicuously exhibit wealth. To show the Joneses we were not only keeping up, but we were surpassing them. Oh…and by the way…my kid is smarter, too. Just look at that bumper sticker on my BMW SUV.
All this confusion about wealth led a generation to spend it all on trinkety evidence of wealth, rather than saving it and actually accruing wealth. Real wealth. All those gadgets and cars and furniture and golf clubs…just drained it all away. Yes, wages were stagnant. But the wages that were made were quickly thrown into the depreciation toilet and flushed away.
Credit cards were the ultimate two-fer, used to buy depreciating products that then accrued interest on the flip-side of the purchase! Wow! How awesome is that model of wealth suction? They got us coming and going.
Even houses became wealth lampreys sucking on the side of the Working and Middle classes. It was, they thought, the one possession they knew they could count on.
Like mutual funds, homes just became another way to pull our wealth out of our pockets and bank accounts. Think of all the money we spent at Home Depot and IKEA as we tried so hard to add wealth to our homes by buying depreciating consumer products like chrome stoves and modern bathroom vanities. Ultimately, it just left us drowning underwater.
The sad fact is that buying things isn’t going to help turn around this economy. It will help the economy of China. It will help the multi-national owners of companies that make things in China, with Chinese labor and resources cut down or dug up in Third World countries and shipped to and from China. It will help those elites smartly invested in currencies and globalized funds.
It will not help your neighbor. Unless he or she is a cashier at Target, but even that is cold comfort in this fading service economy.
In fact, when you buy something you are not really helping the economy. You might even be hurting it. Unless you buy something made in the USA, something grown and manufactured here by real people earning real money while working right here…you are actually transferring your wealth to the corporate captains, to the financial elites and their bankers and brokers who launder your money through China and the Caymans and various points around the world. You are helping people who use offshore factories of depreciation to extract even more of your wealth.
In the meantime, they keep on saving. Accruing. When they do buy “things,” they buy the rare and precious metals their wealthy friends covet. The classic Jaguars, the vacation homes on Martha’s Vineyard and $50 million Picassos they buy…those increase in value.
They hoard instruments of appreciation, using the money they acquire by selling you the instruments of depreciation they build with wage-slave labor in foreign lands.
And if a home or painting declines in value? No big deal. It is not the sum of their wealth. That’s the point.
If you want to turn around your fortunes, and the fortunes of this economy and the people who truly need it to survive, it may be better to stop buying and start saving. That’s what the top 1% did.Tweet