Capital follows a wide-ranging lifecycle. First it is imagined. Then it is produced. Later it is consumed. Ultimately, it is destroyed. How exactly this all takes place involves varying and infinite undulations over decades and centuries.
One generation may produce wealth. While the next generation consumes it. So, too, a doomed generation may inherit an insurmountable debt burden – in the form of mega amounts of government debt – that will dog it to its dying breath. Ingenuity and resolve will be significantly stifled.
As we understand it, the value in money is in what it represents. Every dollar of actual money should be derived from a dollar’s worth of wealth that has been produced. And every dollar of credit multiplied upon that money should imply a dollar’s worth of wealth plus interest that’s in the process of being created.
This is how wealth creation should work in a world where money is sound, budgets are balanced, and bankers stand behind their loans. The present world, however, rarely works as expected. Through policies of state sponsored wealth destruction, wealth is extracted from those who created it and then set on fire with systematic efficiency. Continue reading