It’s the economy , stupid

Have you ever wondered what is the collective wealth of a room that you are in? Well you are not alone! Of late, I couldn’t help but think about the collective worth of a space when I am at closed enclosures. Be it a train, car, a karate class with kids and their parents or an office meeting with colleagues, I keep thinking about the collective worth of the groups.

I try to estimate the wealth of the group and It ranges from the lower hundred thousands to millions depending upon the place I am at.

It’s always higher than the worth of the richest person in the room (duh) .

While I calculate the value of the group’s worthiness is collected , I leave the most important part of their finances out.. debt , yes it’s a pain , and everyone would love a “fight club" esque scenario where all the debt data are erased and everyone starts with a clean slate. But that is Utopia, and we will never get there. Same is applicable for the money that the government takes in the form of our favorite word of the millenia - taxes.

Now back to collective wealth, the wealth of my room has increased/decreased a bit by the time it took us to write / read till this point.

Have you ever wondered why ? Why does it happen?

The most obvious answer is that it’s the economy , stupid. Ok what exactly is the economy? Why does it do weird things , why does it fluctuate a lot , why can’t my money stay afloat or just keep going up. Who wouldn’t love their dollar getting doubled every single day?

Let’s start with our imaginary character called Jack .

Jack is single , he works as a barista at a local cafe. He is skilled , he gets paid $20 an hour. And ends up with roughly $3100 per month as a salary(post taxes and america’s favorite scandal that is called healthcare insurance)

Now Jack enters a room full of people , he sees his landlord , gives out $1100 for rent and all of a sudden he is poorer by $1100. His landlord is now wealthier by the same amount . BUT the rooms’ worth remains the same in terms of cash they hold , YET the landlord is set up for the win as his physical property increases in value , even if it’s by a tiny bit and Jack is setup to fail as he is going to give out rent as long as , well he rents! . Jack does the same for Other obligations he has , like a $250 car loan to the bank and $250 for insurance ,$300 restaurants , $300 to grocers and so on. He

Now everyone except Jack is wealthier , and why stop now. Let’s expand the room, let’s bring in the next set of people in the room.

The landlord invites his staff who manage the property and starts sharing some of his wealth with them for maintenance and salary. The landlord is still richer but lost some of his gains. So does the bank, insurers , grocers each having to share what they got to others. As the circle of these transactions keeps expanding, you can see the room’s wealth as both growing and reducing , while the transactions themselves have not changed much.

Why? Enter the bigger fishes, the wall street folks, the government and things get more complicated. Now terms like sales taxes, investment accounts, retirement accounts are thrown at Jack and he shares the rest of the money with them. The Government puts some of the money back to building roads, bridges, and libraries around the country and Jack gets to see them a bit in his area. The Wall street folks all pour money again to rental properties, grocers etc etc.

The circle just keeps expanding and growing and never shrinking.

The dollar that Jack paid to any of them could be anywhere now. It could be funding a war in the Middle east or helping a random African country.

The only thing that stays true about the room is that the collective wealth always increases despite whether the group that we bring in has debt or has dire financial status. And if you keep expanding the room , would the same thing stand true?

Imagine that we have now filled entire countries into the room, people transact, companies transact, government transact , all within the same room.

What about filling the room with the entire population , and all the transactions that happen within the room. Those who own the money ,those who owe money, those who print money are all in the same room now. And it never comes down to zero as long as there are two people there in the room to transact with. Now what would be the collective wealth of the room? do we just have the amount of money that we have printed within the world as its worth , or does any of these make any real sense in terms of pure mathematics?

Or is that what we can call it as an economy.

Or am I simply being stupid..