More: http://www.meudalismus.dr-wo.de/index.htm
By Harald Wozniewski
Translated by
Johannes Thema, Köln
(Die Daten, die den Diagrammen dieses Aufsatzes zu Grunde liegen, finden Sie in der Excel-Datei http://www.dr-wo.de/schriften/nil/nil.xls .)
Money is vital to every modern economy, no matter whether cash or deposit money. It is mainly currency – the ciculation medium – for the exchange of goods. While real goods (procucts, services, ressources etc.) float in one direction, its medium of payment floats in the opposite direction. An economic downturn equals a decreasing flow of goods and hence a low monetary circulation.
In todays bad economic situation (Germany 2002) we have once again a debate about the reasons of economic crises and the means to overcome them. Of the year-2001-optimism all that remains is helplessness. (Addition 2005-11-16: perplexity still prevails! Those profiting of the existing system are absolutely not interested in changes and spread incorrect information.)
Sometimes news tell us, the people was insecure of their future and therefore would save too much (that is extract money from the monetary circle). But are people really saving? The majority certainly is not, they are rather already in debt (consumers credits, instalment payments, mortgages etc.). They simply cannot afford spending more (Geld, Kaufkraft und die Einkommensverteilung). The reasons for increasingly more severe economic slowdowns lie elsewhere.
Todays Situation
Looking closer at the simplified model of an economy, an observable phenomenon and its consequences occur:
The following diagrams shows a national economy with 100 market participants (x-axis) and a constant money supply of 100 money units (y-axis). As we are observing private welfare, legal persons such as corporations are blanked out. Each diagram shows a different distribution of the existing money supply amongst market participants at a certain moment.
Fig. 1.1: ideal monetary distribution
Diagram 1.1 shows the ideal (equal) distribution of money. Every market participant owns an equal amount of money (in March 2005, for Germany this individual amount would be 8289€ per person or 17469€ per household Geld, Kaufkraft und Einkommensverteilung). The figure shows the situation at the point of time 1, the time-axis is the third dimension going backwards (direction of big arrow), that means we see a cross-section of a cash river.
The order of consumers (x-axis) is not arbitrary. As an economy is an interdependent system wherein individuals deal (= buy goods in return for money) with others, it rather reflects economic and social connections and distances towards the other market participants. The closer they are, the easier the deal. This expresses briefly that not everybody can afford and wants to interact with all others but mainly purchases goods from his “neigborhood”. Deals are cut seldomly with “distant” market players. Thus, money predominantly floats as the arrows show. They start in the present, but the arrowhead already points at the future, marks the point of time 2. Imagining arrows pointing away from every location there are changes of money amounts everywhere. As well there are arrows directing to the original participant who kept (saved) the money.
As initial situations and possibilities differ greatly (e.g. social and financial status, educational potencials), individuals with high revenues accumulate on the right, lower incomes gather on the left side.
Fig. 1.2 monetary distribution at the point of time 20.
At point of time t=20, money volume remains constantly 100 (the yellow area equals the blue one in fig. 1.1).
The differences in incomes do not vary for reasons of different fees and wages, as is common “knowledge”. The crucial difference is the income from interest repayments.Complementary literature:
"Moderner Feudalismus in Deutschland (Meudalismus)" in http://www.dr-wo.de/schriften/feudalismus/ ,
"Personen" in http://www.dr-wo.de/schriften/feudalismus/personen.htm und
"Die Stundenlöhne der 100 reichsten Deutschen" in http://www.dr-wo.de/schriften/feudalismus/stundenlohn.htm
Michael Jungblut, "Die Reichen und die Superreichen in Deutschland - Die jungen und die alten Millionäre", Hamburg 1971, S. 65 ff. http://www.dr-wo.de/themen/jungblut/index.htm
"Die Einkommensentwicklung steht Kopf" in http://www.dr-wo.de/schriften/ee/
"Einsamer Reichtum basiert auf der Verarmung der Bevölkerung" http://www.dr-wo.de/schriften/vwl/
As time goes by, changes in the river’s cross-section increase.
Fig. 1.3
Fig. 1.4
Fig. 1.5
Fig. 1.6
Currency supply of the Fig.-1.6.-economy still is 100. Only the distribution changed: the players to the left only kept 0.01 money units. (Addition June 2005: in reference to the above amount of money in March 2005, the money amount 1 equals 80 €/person or 170€/household - 1% of the original budget.) Obviously, there is no serious business activity possible. Market participant No. 100 aquired 11.15 money units. (Addition June 2005: in reference to the above amount of money in March 2005, the money amount 1 equals in Germany 89237€/person or 189269€/household.) Transfering this relation to incomes, we get close to realistic figures:
0,01 / 11,15 = 10.000 Euro p. A. / 11.150.000 Euro p. A.
Fig. 1.7 summarisation of different distribution stages
Turning fig. 1.6 upside down and constructing a reflection at the right side, produces a vivid graphic demonstration of todays economic situation:
Fig.1.8 money flow like River Nile
There is a big and powerful cash river flowing, but few people really participating and the majority inhabits the dry river banks, economy is down.
These are simple but realistic calculations:
Fig. 1.9 cross-section along the time-axis from t=1 to t=100 at the points of fig. 1.1 to 1.7
Fig. 1.9 demonstrates the market participants and their gains and losses of money in the timeline at the stages of fig. 1.1 to 1.7. The biggest accretion is 0.1 money units per time period (player No. 100).
Economy’s Deceleration - Effect of Meudalism (Modern Feudalism)
It might occur surprising to think that income concentration with the superrich slows down economic performance as total currency supply remains equal. But explanation can be provided easily.
Dear reader, you are part of the German majority of people earning less than 100.000 € per year? Ask yourself: if in January you had gotten another additional 1000 € to your regular budget this year: how much time would you have needed to spend it? Probably your answer is – as with nearly all persons I have questioned – about one hour to one week.
Given you spent the 1000 € within one week, someone would have earned this money this moment additionally (or more people would have shared it). They in turn needed only one week for spending it etc. etc. Calculation provides: your 1000 € would increase Gross National Product by 53000 €!
That is not the matter with the incomes of the rich. They have revenues of more than 100 million € per year, e.g. from dividends, company profits, loans, rents. For those it is hard to spend only one million a year. They only buy a few rolls, a few newspapers a week, not thousands. They rather invest in more shares and other profit-orientated projects. But overall, their cash handling rate seldom lies above 1, that is their total amount of money is used only once a year. The effects of a high cash handling rate as mentioned above is inexistent. Moreover, those funds rather flow exclusively between equally rich persons but towards the masses of the people (e.g. auctionary purchase of luxury goods such as yachts or paintings).
( Einsamer Reichtum basiert auf der Verarmung der Bevölkerung http://www.dr-wo.de/schriften/vwl/index.htm )
As you can see – fabulous riches do serious damage to the others.
How to solve this problem? Think about it –
- and only then check this link.
http://www.dr-wo.de/schriften/nil/nil2.htm
Original: http://www.dr-wo.de/schriften/nil/indexen.htm
More: http://www.meudalismus.dr-wo.de/index.htm