Dec 18, 2008

Does anyone really understand money?

Posted by: Marian Salzman In: sightings from the zeitgeist| the economy| trendspotting

It’s sobering to think that humans have harnessed electricity, mastered supersonic flight, tamed nuclear energy, enabled instant communication around the world and mapped the human genome, yet we still haven’t mastered money.

We thought we had it nailed, more or less, but then the current economic crisis proved us all wrong. It’s not surprising that many ordinary citizens became dizzy in their money management, but now it’s startlingly clear that high-flying financial professionals did too. Where did all those hundreds of billions come from and how did they just disappear? How could financial instruments that were supposed to spread risk ended up amplifying it?

Now authorities are doing whatever they can to keep even more money from disappearing into a vortex. But not even the loftiest can be sure that their initiatives will do the trick, because we’re in uncharted territory. We’ve never before lived in a world where news circles the globe instantly and where so much money exists only in electronic form.

Assuming things return to “normal,” will we be any closer to mastering money, or will it always be more powerful than its creators?

  • cadsuch
    Spreading risk; does spreading risk seem like a free enterprise, capitalist democracy type activity to be considering?

    Is this a socialist activity, spreading risk? In my books on free enterprise capitalist democracy, there is reference to capital and labor and buying and selling stocks and bonds, and interest rates and price earnings ratio's earnings per share of stock.

    Is this some of that creative accounting, that got ENRON and WorldCom into trouble?
  • cadsuch
    I'm unclear about the instruments that were designed to spread risk. Where in the clasical book on free enterprise/
  • The problem that we face is not money, but people. Greed has such a strong hold on so many people that they will do anything to obtain money. It doesn't take many of these types of people (Madoff) to destroy vast sums of resources in the pursuit of money. Our current system of maximizing shareholders wealth has created an enviroment of greed. It is all about this quarters earnings and not about the 5, 10, 20, 30, or 100 year plan for the company. We need to rethink our priorities so that we don't destroy our world for a few shiny trinkets.
  • Rombus
    Hording yard sticks will not make you taller nor will hording scales make you heavier. Money is a tool to measure value and only when its used by those who create value. US dollars are being horded by those that don't create value so watch it become what it really is. Paper with Ink on it.
  • Mark
    I admit I don't. But, a colleague pionted me to this resource which shed some light and also frightened me to the core. Apparenly, our leaders don't understand money, either - to all of our detriment.

    Take the Crash Course here:
    http://www.chrismartenson.com/crashcourse

    There may just be time left.
  • Dan
    After I took Financial Management ("Finance") at the university level, I was amazed that this course is not mandatory in high school. It should be mandatory, in every high school in the U.S.! Maybe that is one way to encourage more people to "understand money". That being said, the things you mention in this post -- "electricity, supersonic flight, nuclear energy, instant communication, human genome" mapping -- are truly great advancements. However, money has one powerful side effect which the aforementioned list lacks: greed. Until we master greed, the understanding of money won't really matter too much.
    -- Dan (Texas)
  • Bill
    How could financial instruments that were supposed to spread risk ended up amplifying it?....In a word... FRAUD. Those hundreds of billions didn't just up and disappear. The money wound up in someones' pocket or Swiss bank account. Money in one nest egg??? Stupid, dumb and totally wrong. Spread it around to hopefully minimize risk. Go with a financial institute with enough capital and backing to weather the storm. In a word...Hartford.
  • Marian Salzman
    After we're watch people suffer over money lost, especially money they thought was well managed by Bernard Madoff, we realize how little we know about money and how it all works.
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