An Important Distinction

From week-before-last’s Economist, the Buttonwood column:

Wealth consists of the goods and products we wish to consume or of things (factories, machinery, an educated workforce) that give us the ability to produce more such goods and services. Financial assets arise from the desire to postpone consumption so that money can be saved, either for precautionary reasons or to invest so that more goods and services can be consumed in the future.

Looked at in that way, financial assets are not “wealth” but a claim on real wealth. [link]

Seems commonsensical, but alas, common sense is not all that common.

Be Sociable, Share!

If you enjoyed this post, make sure you subscribe to my RSS feed! You can also follow me on Twitter here.

Leave a Reply