The Virtual Wealth

Image Credit http://moneyconnexion.com

A sparkling shopping mall with quite a few international fashion giant started operation within spitting distance from my house and wow, my friends told me that I have become rich because the property prices have soared. But the problem is with my income remaining the same as earlier – I fail to understand how my becoming rich have helped me. But they insist that I have become rich.

Welcome to the world of virtual world – a world built around fantasy and hype, ready to suck in the gullible and the intelligent alike with promises that would put the greatest con man on earth to shame. In this world we believe that wealth is created without adding anything to economy or, at the best, by adding only a fraction of the increased wealth. We multiply the number of shares issued by a company with price per share and compute the market capitalisation. We rejoice considering how lucky we are to hold quite a few number of shares in that company. So we plan our vacation or the new car or even a new house. But if even 5% of the shareholders attempt to convert their virtual wealth into cash – the prices will come down tumbling and no matter how many King’s horses and King’s men we employ – they will not be able to put it back again. The wealth will suddenly be gone.

Wealth should represent ability to earn in future – ask any accountant and they will refuse to accept anything as an asset unless it promises to generate future economic benefit. Unless the virtual wealth can be converted into cash and put into productive use – the wealth would remain a fairy tale dream. But then we believe in fairy tales – don’t we specially when our mind is obsessed with the dream of the virtual wealth?

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An idle asset is at best a receptacle of wealth and there are many options – most of them holding the wealth for some time. So we put money in stock market, trade in crude future, invest in gold, deal in foreign exchange, or buy properties. Most importantly we keep shifting our wealth between these receptacles. So we withdraw money from one receptacle and put it in another one  – and no matter what that does not increase wealth of any nation. We play a grand zero-sum game like a group of gamblers gambling in a closed room – all they do is to have money changing hands – the total money in the room remaining unchanged. It is only the brokers and casino owners who consistently earn real money.

But then we love to dream and to kindle the dream there will be stories of extra ordinary profits made by common men. However real they may be, they are those who decided to convert the virtual wealth into cash while others waited longer and saw their virtual wealth vanish. So they come back again with vengeance assuming they have learnt their lesson and will make good all loss this time. Again for every success there will be millions of failure and only the success stories will make their round of enticement.

We will again come back in hoards and bolster the world of virtual wealth. In the world of mob mentality – a rational thinker  is an outcast.

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