Speculation vs Investment

We almost instinctively know that a good economy is based on productivity.  In this ideal economy, we earn money based on our productivity. We spend some on what we need or want, and we save what we don’t spend.  The savings are loaned out as investments in enterprises that produce goods and services.  These investments produce additional income, enriching the investor and the economy as a whole.  The entire system is characterized by money, saving and investment.

Unfortunately, we don’t live in such an economic system. Instead we live in a world of speculation.  Speculation means guessing and gambling.  At its foundation is manipulation and fraud.  Our currency once represented real gold and silver.  Now it is backed by nothing but collective faith that it will still be worth something tomorrow.  Much of what we work at is not productive, but bureaucratic.  We don’t save because we are saddled with debts.  We don’t invest, we gamble in the markets, the greatest casinos of all time.  We gamble that someone else will pay more for something we bought without knowing or caring what it produces.  The central banks have manipulated interest rates so that saving actually costs you.  The government taxes us to pay for other’s benefits, which we will probably never see ourselves, while amassing unimaginable national debts that can never be paid down.

Deep down we all know this is wrong.  Most people just don’t’ want to deal with what this will eventually mean.  They wish to “sing and dance” until the party is over.  The rest of us look at what is going on and are terrified of how it will end.

The reason to be terrified is that speculation never ends because people “wise up” and start to take corrective action.  Speculation causes bubbles.  Bubbles burst with a lot of people, companies, and governments suddenly bankrupt.  And nobody wants to take the blame for this when it happens.  People and companies will want the government to fix their problems.  Governments will not accept the blame, especially those that won’t give up power voluntarily.  Instead they will blame other nations.  All of this has frequently happened before.

Too often the result is financial ruin, followed by the even greater calamity of war.

What to Do

Recognize the system we are operating under, but don’t get caught up in it.

Gain the skills to be productive, and do your best to create and produce.  Do your utmost to stay away from speculation and gambling.