How to create wealth?

by PIM of SPAIN | November 14, 2009 at 09:03 am

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A question that many people continue to search for is how to create wealth. Well wouldn’t it be nice if there were some easy method for creating wealth and passive income streams. But realistically there isn’t any that I know of, if wrong, write your suggestions below in the comment box. (italics: slightly reworded from original)

To be more precise, by the idea of wealth people think about money, however wealth of misery is also wealth, to show the extremes. Flooding the market with stimuli money that generates more debt destroys wealth that is like the use of fuel to extinguish a fire.

Responsible personal finance is the most important aspect in wealth creation in life than anything else, which often is overlooked. Creating wealth brings happiness and ease of life, by removing the many stresses on financial challenges and burdens.

However wealth is created by hard work, saving, innovation, investment, and perseverance.

While wealth is created by work and saving, it is destroyed by consumption and debt. When money is borrowed, it has to be paid back again. During that event wealth is draw down, living standard is reduced, and a decrease into the savings that were made before or not going to be made at all. There is no way out from paying off debt, every dodge will make the situation worse.

A new generation of economists took over from the ones that lived through the Great Depression 1.0. Most of them born after the war, they only know hard times from history and movies. They have never lived through hard times and learned the old reality of thrift.

They think the key to prosperity is spending. Consumers spend until they can't go on anymore. Then it's up to the government to help them out, with stimuli packages and tax rebates.

That's why governments run such high deficits. They all think they need to keep up spending - at all costs - in order to boost the economy. Of course this makes no sense, not theoretically and not practically either. Moreover there's no evidence that it worked in the past either.

Every time governments have intervened with large stimuli of countercyclical spending they have made a mess of the economy, either by stimulating the private sector to further acts of reckless insolvency, or by blocking the process of honest market correction.

Dave Rosenberg says the unemployment rate is headed to 12-13%. And then, it's going to stick at more than 10% for a long time.

Think about it. We haven't yet hit bottom on employment but that will happen at some point. Employment is not going to zero, of that we can assure you. But when we do start to see the economic clouds part in a more decisive fashion, what are employers likely to do first? Well, naturally they will begin to boost the workweek and just getting back to pre-recession levels would be the same as hiring more than two million people. Then there are the record number of people who got furloughed into part-time work and again, they total over nine million, and these folks are not counted as unemployed even if they are working considerably fewer days than they were before the credit crunch began.

So the business sector has a vast pool of resources to draw from before they start tapping into the ranks of the unemployed or the typical 100,000-125,000 new entrants into the labour force when the economy turns the corner. Hence the unemployment rate is going to very likely be making new highs long after the recession is over - perhaps even years.

As explained before this crisis will become a long lasting Japanese-like slump.

Capitalism doesn't make anyone rich. It only allows people to compete for wealth on more or less equal terms. Obviously, some are better at it than others. Most people prefer alcohol, television or jobs on Wall Street to the rough and tumble of real enterprise and entrepreneurship. And almost everyone is prey to bubble illusions, hoping to get something for nothing. And then, when capitalism corrects their mistakes, they turn nostalgic, longing for the state to intervene and rig the game in their favour.

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Karl Gotthardt - albertacowpoke

at 09:18 on November 14th, 2009

I would agree there is no magic solution to wealth, unless u win the lottery. Even then you have to guard against consumption.

Education, hard work and financial discipline is really the only way.

Barry ORegan

at 10:48 on November 14th, 2009

I hear kidnapping Cargo ships off the Somalia coast is pretty good coin, course it can be fatal as well

PIM of SPAIN

at 10:54 on November 14th, 2009

Very good thoughts Roy, a good quality contribution to this essay, for which I'm grateful.

Indeed its back to basics, no way around that! The 'egg heads' have to discover that too. And many others in charge with them. Even my favorite Head of State Angela Merkel
is falling under pressure of more spending by her new coalition liberal partners in Germany. She couldn't withstand the pressure of the growth by consumption crowd!

PIM of SPAIN

at 10:56 on November 14th, 2009

Barry a very well thought suggestion, howerer it belongs more to the wealth category of misery.

Hugh Askew

at 13:44 on November 14th, 2009

"Capitalism doesn't make anyone rich. It only allows people to compete for wealth on more or less equal terms."

PIM, don't be spreading truth around like that.

I got a real roasting yesterday by someone that told me SOME ONE, had better do something NOW, because she couldn't afford to pay for more. It was her RIGHT to have what everyone else has. There was no telling her different. By golly, she was MAD. Her 3 year old car wasn't good enough, her health care was too expensive, and it was some one's fault. Of course, she had a degree in Education, no less, and deserved more.

It will be a difficult thing to re-educate the west on capitalism. We have been weaned on the socialistic ideal of the nanny state. When it crumbles, there will be disbelief, unrest, and widespread revolt - my guess. When it comes? No clue. Will it come? I think we are well into the beginning stages. Time will tell.

Rory Cripps

at 15:34 on November 14th, 2009

Hugh: Are you really a Marxist? HA!

marianmo

at 14:12 on November 14th, 2009

hmm how about marrying a wealthy man or woman

Rory Cripps

at 15:36 on November 14th, 2009

marianmo: Sometimes that high maintenance stuff isn't all that it's cracked up to be . . .lol!

Karl Gotthardt - albertacowpoke

at 15:37 on November 14th, 2009

Do you know any marianmo?

marianmo

at 15:39 on November 14th, 2009

yep

Babel-Fish

at 22:13 on November 14th, 2009

Creating wealth is actually very easy if you have a product that everybody want. In USA its guns, dope, prostitution and gambling that are the solid earners. In fact that's nearly the same else where.

On a more serious note is producing products that people want to buy because they have been given the correct and affordable price. That means jobs for those skilled in making such products and creating consumers to buy other products. In the USA its going to be all about selling abroad and keeping the money within USA society and of course investing in America.

But of course there is a easy way to create wealth for your self you copy the actions of a real expert lol

GREGY.K (not verified)

at 23:16 on November 14th, 2009

Napoleon once said that, when China awakens the word will tremble

GREGY.K

at 00:07 on November 15th, 2009

Money was never a big motivation for me, except as a way to keep score .

The real excitement is playing the game......

PIM of SPAIN

at 00:10 on November 15th, 2009

Indeed HA capitalism is the best system for the free market society although some limited socialism is required for the real needy ones. However that has been over drawn by people like you mentioned, their mantality is typical for today's welfare citizens. I may dedicate an essay to it.

Iffy (not verified)

at 06:48 on November 15th, 2009

You paint an over-simplistic notion of wealth creation that would be more suitable to a living room cocktail party circa 1950 in Mr Rodger's Neighbourhood. Wealth creation is done by two means: either hard and intelligent work; or by being a rentier (owning something that you then rent out). The hard and intelligent work does not have to be legal. In fact, the profit margins in creating illegal wealth are enormous and far out way the downside. The story of capitalism is the story of gangsterism. Of criminal syndicates spying markets and unmet demands (like the desire to get laid or get high), and providing products for those demands (whores, drugs). To be a good rentier you need the law. And that means forming a class and then using the political system to re-write the laws in your favour and to guarantee your rentier wealth. I am afraid to say the most profitable sectors in today's world is illegal wealth creation and being a rentier. This means there is very little incentive for people to do the hard graft of starting a small business making watches or something legal and nice.

Riisho (not verified)

at 06:38 on November 17th, 2009

Right on!I completely agree with you. As far as I am concerned, capitalism in america is tantamount to "legalized"crime. The "work hard and you will be rewarded" notion is really quaint. I know someone who has manages small cap funds for various financial companies in new york. Every time he gets fired, he gets a 400,000 dollar severance. In the mean time, my small mutual fund hasn't gained any value in ten years.Americans are delusional with their notion they live in a democracy.

PIM of SPAIN

at 07:39 on November 15th, 2009

Iffy I didn't paint it too simplistic and wrote the same you're are writing: ...wealth is created by hard work, saving, innovation, investment, and perseverance. If you have earned yr money you can be an investment rentier, as you and I correctly stated. Of course the crime syndicates do another job in wealth creation, but that belongs to the misery section as above is explained. Fortunately there still are new young entrepreneurial people around that do have the energy and the perseverance to start their own business. You should go around with me and I'll show it to you.

Darryl Hill

at 08:02 on November 15th, 2009

you can always get into internet marketing and make lots of money.
Design a great website and market it.
like mines

tikun

at 15:31 on November 15th, 2009

Wealth accumulation is driven by having the temperament or as they say in the Bronx, balls, to make your own brakes and be as independent as possible.

Most of all, LISTEN to the needs of the people around you.

LIVE BELOW YOUR MEANS.

Enjoy your work and have fun doing it.

Oh I forgot to mention the luck that is sprinkled into the mix.

Put away some money every week and let it work for you. Having your own business is risky and often lonely but for me it doesn't come close to working for others. Not to say that being employed isn't righteous.

Put all this into the mix and just maybe the outcome will be plenty. Someone once said that you do not have to have a million dollars to live like a millionaire. I finally understood what he meant by it.

PIM of SPAIN

at 00:24 on November 16th, 2009

A very true advice Tikun you gave. It shows you do have the real entrepreneurial blood in your vanes. People without won't be able to create wealth unless they are crooks amongst them the ones that 'walk' Wall Street. The only enemy of an entrepreneur is envy, others see your wealth, but not the loneliness in your decisions and successes and the 100+ hours you put into your business every week

tikun

at 04:41 on November 16th, 2009

PIM, you understand.

It is like an actor finally making the "big" time and people thinking how lucky he/she was. Not realizing that this soul spent years of his/her life working, studying endlessly and pinching pennies in order to get this break. For every one chosen thousands are never heard from.

Witnessing first hand the false starts and stops along the way. The rug being pulled from underneath you and the endless promises that come to naught. In spite of all this you plug away happily working those long hours and even enjoying it most of the time in order to be your own boss. Then just maybe you find some success and enjoy the fruits of your own labor.

PIM of SPAIN

at 06:56 on November 16th, 2009

Exactly tikun that is the pure full blood entrepreneur you describe, only to be understood by other entrepreneurs, since the rest are corporate clowns, or loan slaves that sit the largest part of their time behind the TV eating snacks and drinking alcoholic and soft drinks.