Property

Land is true wealth

Land is true wealth

Recently, I went to a book club meeting, during which a speaker asked everyone the following question: “What is wealth?” Most people answered, “money”. In the capitalist society nowadays, “Money is wealth. It is a consensus deeply rooted in the minds of many.” Be it paper currency, electronic money or traditional currency – coins made of gold, silver and bronze, money itself has no actual value. It is merely a tool that can be used as payments for goods and services. The first man to define wealth in economics is the philosopher Xenophon (430-345BC), who stated in his book Oeconomicus that wealth is something that has value in its use. Another philosopher Aristotle (384-322BC) also pointed out that “True wealth is made up of… value in use; take for example, horse, cattle, sheep, land and other things that are actually useful is wealth.”

Currency is nothing but a piece of paper if it does not serve as a medium of exchange for goods and services. In places where there are serious inflation or war, currency collapse is very common. Like the precious metal gold, which used to be a common currency in many places for a long time and the most legitimate value of wealth. However, as the gold standard was taken off and the US dollar took dominance, the importance of gold as a currency took a nosedive. In this day and age, several people have forgotten about their original goals of gaining wealth since various financial products started flowing in. The pursuit of an increase in wealth has turned into merely earning and possessing money.

Things would go in the opposite direction when they are carried to an extreme. People have been wary of buying complicated financial products because the amount of wealth brought by the products has been greatly reduced ever since the 2008 financial crisis. On the contrary, with the quantitative numbers easing, the amount of money in circulation has increased considerably. And unfortunately, the increased amount is mostly controlled by the rich. The poor have no share of the profit brought by the policies. They have no money and no ability to increase consumption. As for the rich, they have everything they need and are not motivated in using the increased amount of money in consumption. In the end, the world economy remains stagnant. The rich earn money by making investment in the real estate sector, especially in large cities where supply of new housing is always scarce. The real estate prices increase continuously and it seems rather unreasonable. However, judging from another perspective, currency is only a medium of exchange. Once people have lost their hope because of the excessive monetary supply, the wealth storing function of the currency could be replaced by property. The cause of a skyrocketing housing price is not an increase of value in the property but merely that currency is losing its value and is depreciating.

 

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