Money, the Economy and My Money

Disclaimer: I wrote this before I understood the macroeconomic variables: C (consumption), I(investment), G(Govt spending), NX(net exports); the IS*LM curve; relationships between interest rate, inflation, exchange rates, unemployment, etc; trade (subsidies, tariffs); poverty; agri-industry-services mix; FDI/FII; etc. Not that I am an expert in any of the aforementioned, but what follows was written when I no knowledge whatsoever of economics:

For many years now, I did not understand phrases like "the economy is picking up" or "the economy is slowing down", etc. and how "the economy" relates to our lives. After awhile, I began realizing that an "improving economy" means jobs for the unemployed, greater choice of higher paying jobs for the already employed, time to move money from savings accounts into investments in the market, and time to spend. But what makes an economy strong or what makes it improve?

The value of money lies in its flow. If the rate of flow is increasing, the economy is improving. It's all about the volume of currency changing hands in unit intervals of time. If money has ceased to flow, the economy is sluggish, i.e. if money isn't changing hands, we won't get any, nor will we spend any. A caveat is that governments should be able to monitor this flow, i.e. they should receive taxes for every transaction, depending on what form of exchange the money aided: income, excise, sales, etc. If this doesn't happen, there might be parallel economies emerging without being regulated by policy makers/enforcers.

How do we know if the economy is strong? The more people are employed, the more human resource is in use, the stronger the economy. As more and more people change from (1) tribes in forests who make their own tools and hunt for food, to (2) rurally settled who cultivate plant and raise livestock, to (3) urban settled who work in mills and factories in industrial processes towards infrastructure development, and to (4) metropolitan/cosmopolitan settled who work in discovering, creating, processing, applying and disseminating knowledge; the stronger the economy. The higher the GDP or the higher the per capita income times the population, the stronger the economy. But the last definition depends on the value of the currency, which depends on how strong the economy is. The stronger the economy, the less it's affected by short upward or downward trends.

How strong a currency is relative to how the weak currencies of other nations are. Consider a graph where each nation is a vertex. A directed edge runs from a one vertex to another, if the former nation exports goods/services to the latter. The edge is annotated with the values of goods/services traded. The higher the exports to another nation compared to the imports from it, the higher the ratio of the currencies. There are multiple paths from one nation to another along the edges of this graph. The ratio of currencies somehow stablize so going along any cycle of vertices connected by directed edges, and converting currency at each nation won't lead to much profit or loss in the end. If a cycle is unbalanced, people can make money without providing any good/service in return.

Science and technology fuels the economy. Automation reduces the requirement of manual labor in both agriculture and industry and frees human resources to be used for knowledge enhancement. Advancements in transportation and communication have made locating and acquiring resources easier, cheaper and faster. Improvements in medicine and biotechnology have resulted in longer and healthier human lives and increased yields in crop and livestock leading to higher productivity per person. With advancements in computing, we are embedding intelligence, coded in software, in devices around us; thus, offloading our responsibilities of data processing and decision making and making us available to do more. The population that consumes these developments in science and technology moves to newer forms of civilization, reflecting a stronger economy.

Back to money. I see money shares some properties of water, i.e. it flows. Continuously flowing water is purest, similarly, continuously flowing money has the most value. Like stagnant water, money piled and unused becomes pale and loses value. It's not just inflation, the currency is affected by political/social/economic changes. Piled and stored money may even slip away in mischeivious manners without our knowledge of it. We might stow away our money in banks, but banks prevent it from piling up and being unused by loaning it to those who have use of it.

The value of money changes with time and circumstance. Money enjoys more worth when used by the poor than the rich. Money is more important in catastrophes, disasters and accidents than safe, secure and predictible environments. Insurance transfers money from environments where it's worth is low to where it's worth is high. Money's value depends on when and where it comes in life, so given a choice, I'd choose to take a million at the age of 20 rather than 100 million at 60. Money is valuable only as long as it's current possessor has a desire to use it.

Money takes the form of how it's acquired and used. Money used for bare essentials by the needy is money that enjoys dignity because it knows it's served a purpose. Money used for extravagance by the affluent is money that was disrespected as its potential wasn't realized and it gets squandered for trivial purposes. Money that's stolen, whether by exploiting basic human needs or by sparking fear of death or injury, it may bring hurt in the form of ill will or revenge, since it was forcefully separated from it's rightful owner without any compensation.

Since I've begun earning money, my life and world have changed. Back in school, I used to respect the little pocket money I got, since it was my father's hard earned money. He's maintained an expense budget all his life. My parents lived thriftily so we had a better future. I got what I needed without asking for it, but I kept my extravagant wishlist to myself. The money I got wasn't 'my' money, it was 'our' money. So I wouldn't register its use as long it was for 'our' collective well being, where 'our' even extended to relatives and close friends. Now, the money I earn is 'my' money. As long as it's used to serve my whims and pleasures it's ok, but I quickly register it's use, however meager, for any other cause or any other's benefit. Today, I am a slave to the conveniences and comforts I can afford. I have my own agenda to systematically indulge my wealth in my pleasure. Luxury and entertainment have become habit and no longer excite me as they used to. I've also begun to attach a cash value to everything. So, my health is worth as much as medical treatment will cost me to keep me fit. My education is worth as much as the salary I make from the job I got because of it. My friends are worth as much as they are helpful, resourceful and entertaining. Money should be a means to live, but I've made it the goal of life.

The fact that I am making good money is my good fortune. I've been assigned a fixed count of breathes this life. Similarly, how much money I'm supposed to receive and when is partially pre-assigned. I'm simply supposed to be caretaker for the money for the time period I've been assigned its possession. Who I take money from or who I give it to is perhaps predestined. Money is a gift. I shouldn't flaunt it, I shouldn't exploit it, I shouldn't become too attached to it, but I should use it properly and responsibly.