Investing in the Future

During a discussion period at the AAII Conference in Minneapolis on 11th May 2017, I briefly discussed that, in the near future, there will be no investment opportunities and no money to invest even if there were investment opportunities.  Of course, this concept took the audience of more than 100 people by surprise.  One woman even asked me the following: “how will we buy groceries”?  My answer was simple:  “there will be no cost because there will be no money”.

Towards understanding my view of the future, it is necessary to understand what is money.  In the simplest possible terms, money is a measure of the amount of human labour, which is measured in units of time, required to produce a unit of goods or services.  As an example let us consider the case of a blacksmith and a farmer.  The farmer needs a scythe to cut his wheat crop so that it may be prepared for market.  The blacksmith needs only a small amount of wheat for his stables: however, he does require a considerable amount of wood for his forge.  For the moment, we shall set aside the issue of the relative utility of the scythe to the farmer and the wood to the blacksmith.  Let us say that it takes the blacksmith 400 hours to make a scythe of sufficient quality to be of long-term use to the farmer and it takes 400 hours for the farmer to cut and stack 15 cords of oak wood.  It is apparent to both the farmer and the blacksmith that a fair trade, ignoring relative utilities and future gains, would be one scythe for 15 cords of wood.

However, how can we handle the trade if it is planting season and the farmer needs the scythe by the harvest while the blacksmith needs the wood during the planting season so that he can have the scythe finished by the time that harvest arrives.  Also, we must consider the possibility that the two parties are remote in both to time and space.  If the farmer could exchange his wheat on a market for money, then he could use that money to purchase the scythe from the blacksmith rather than cut and stack sufficient oak wood to exchange for the scythe.  Similarly, the blacksmith could sell a scythe to another farmer to obtain money to purchase the wood to build the scythe for the farmer in time for the fall harvest.

That is, each of the farmer and the blacksmith would exchange a unit of their productive time in exchange for an amount of money.

Now, what if no human labour was required to produce either the wheat or the scythe.  In the most basic sense, neither the blacksmith nor the farmer could exchange money for any unit of goods or services.  Of course, the most apparent counterpoise argument is that the blacksmith owns the forge and the farmer owns the land.  Without the forge, the scythe could not be built and without the land, the oak wood would not be grown.  The issue is actually one of capital allocation, which we shall address shortly.

I hope that this helps.

Nathan A. Busch

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