How does the world get richer?


If a poor country in Africa becomes rich, wouldn’t they need to get money elsewhere? Thus making the other place more poor?

In: 1

It’s actually what the people in the ancient times belived.
That there is a fixed amount of wealth in the world and if someone is getting richer it means someone else is getting poorer.
They didn’t realise that technological advancement equals increases in productivity and in wealth

Basically interest is the price of money and banks loan out money to ppl for houses cars etc and they make more money back by charging interest. Then you have the federal reserve which can just print money by using a system that is tied to interest rates and inflation. This part is actually very complex the fed can basically print money but it kinda can’t.

Because money isn’t wealth.

Let’s assume a tiny, enclosed system. An isolated country, no more than a field, that never printed more than 100$ in their currency. You are one of the richest citizens in this barren country, holding 50$. You decide to spend your whole 50$ on a building company to create a house for yourself. Now they have your 50$ – but you have a house worth 50$. The total amount of currency in the country has stayed the same, but you have generated 50$ of wealth courtesy of the building company’s labour.

“Wealth” is, to a degree, fictitious. While there is no commitee actively planning how the world economy will work, but “pure” economics, especially at large scales, is simply something that doesn’t exist: political power influences things. Unless your hypothetical country is able to to control their resources, they’ll get a cash injection but someone elsewhere will be making a bigger bank.

There are indeed systems which (to a degree) regulate how much money “exists”, but debt can be almost magically created as long as all parties trust in the system. Hell, that’s not even something purely in the realm of international economies, it’s how the bulk of the world’s banks operate. As long as there’s an expected cashflow, debt can be treated like real money and grow with much less bounds that other assets.

Currency itself is based on mutual trust. Global hegemony might make it seem like everything is “based” on the US dollar or the euro, but even those are not fixed (and no cryptobros, cryptocurrencies aren’t magically exempt just because of finite amounts), as ultimately their “value” comes from what the various economic systems “expects” them to be able to trade in exchange.

Money is not wealth. Money is a system people use to help tack who has what amounts of wealth.

It’s the actual things that people have that are what makes up wealth. If a person has no money or property, they are poor. If a person owns land, two villas and a couple of manufacturing plants, they are not poor, even if their bank balance is near zero.

Similar with nations. If they produce very little, they are poor. The more things they make, the wealthier they become.

What happens is that, let’s assume a pen sells for one dollar: if you make 1000 pen a month you earn 1000 a month. If you make a better machine and now you produce 2000 a month, you earn 2000 a month.

The more the world gets able to produce the more wealth there is to share. Then money is a sort of measuring device. On a big scale, you can assume that as the value a man produces goes up, his salary goes up. But money is an arbitrary unit of measurement. Let’s say, it’s an ok method like measuring a distance in steps is. It is not precise, you may change the measurement by walking differently (currencies) steps get shorter or longer based on how fit you are that day (inflation). But yeah on a big scale the world gets richer because it produces more.

About countries earth: What is happening is that the gap between poor and rich countries is becoming smaller; it’s still big tho.

Firstly, let us define what is richness or wealth in other words, wealth.

Wealth is an abundance of resources, supplies or material prosperity.

So money does not necessarily mean prosperity, rather it is just a credit system schemed in order to conduct economic activity. This is why printing more money does not equate richness.

Furthermore, since wealth is just an abundance of resources, meaning you have surplus of resources, this usually entails that someone else who’s lacking of what you have will want some of what you have for a price.

This in turn creates trading. In exchange of their monetary wealth, you give some of your stuff. You benefit, they benefit as well.

The world’s richness as a whole is closely interconnected and it could spell an economic downturn if a country gets disconnected from the global market. An example is Iran which was sanctioned by United States causing a devastating economic downfall of their gross domestic product of 445.3 billion USD to 191.7 billion USD within just the span of 3 years (2017-2020).

Money isn’t what makes you rich. Goods and services make you rich. Money is just an agreed-upon way of exchanging for goods and services.

You become rich by producing more goods and services, or by producing more valuable goods and services

The amount of money you earn is your “proof” that you generated something of value and is your share of your countries economy. It is your cut of the products your country generated in this time. So money isn’t valuable, it is the goods + workforce over time that generates the value and wealth.

Money isnt wealth. Real money is resources. Resources are ever expanding. Think about how much growth in tech and resources we’ve seen in last 20 years. Thats the real growth.
Money on the other hand(fiat currency) can be printed to unlimited amounts and has value against the real world assets.

If assets growth = 5% and money(currency growth/print)= 3%- That means the country grew in real terms. Because assets growth outpaced the currency printing. Same logic goes the other way. So youre really fucked when your country prints a lot more money and has no asset growth to back it up