A Course in Economics
Sherwood Tribune, March 14, 1979There was a philosopher in the Old Country who defined architecture as "frozen music." Of course Americans admire European architecture and towns, but we are more likely to define buildings as frozen capital.
The freezing and unfreezing of Capital is arguably the most important thing that happens in the industrialized world we live in. Is there a heart so cold that it cannot be stirred by the drama of capital formation?
Listen to what a rather dull book about accounting procedures has to say on the topic of CASH FLOW: "Cash is the lifeblood of a business.... Management is deeply concerned about the control of its flow into and out of the business.The operating cycle begins and ends with cash."
And here I thought accounting was "dry as dust."
Business journals often refer to money like that, as if it were a liquid. A recent issue of Business Week reports that there is "..an enormous sea of liquidity" in the so called Eurodollar market, enough to keep economies humming on both sides of the Atlantic Ocean. The origin of this "enormous sea" derives from another precious liquid: Middle East oil, which can only be paid for in American currency.
As one follows the ebb and flow of this fascinating topic through the precipitous looking pages of finance journals and economic textbooks one's mind's ear begins to hear a veritable ocean indeed. It covers the entire globe and no part of the globe is unaffected by changes in the current. It cascades freely through every door and window, no matter if the building is owned by a rich person or a poor. It streams through every place of business, in through accounts receivable and out through accounts payable.
The Small Business Administration warns that a business's lack of complete awareness of this current (poor bookkeeping) sinks more ships, as it were, than any other factor.
Armed with an awareness of cash flow problems a trained observer can actually see how buildings in his own community are erected, kept standing, increased in size, and then swept away in the flood... along with the people inside those buildings.
Officers in big corporations aren't as above it all as they might think. "Every year," reports the Wall Street Journal, "companies transfer hundreds of thousands of employees. Many... are relatively young men with school age children." About 40% of these "factors of production" (as the textbooks refer to working people) have moved at least four times in their careers. It is not perniciousness on the part of their bosses that causes the inconvenience, but rather the need to keep capital in motion that causes it. Americans are quite accustomed to hearing about how societies that refuse to break with the past will wind up at the bottom of the economic sea.
One way to keep afloat is by treading water (i.e. borrowing money). The average American family today spends more of its income (21%) for borrowed money than families have in the history of the country. As one Sherwood housewife started: "My husband and I don't really care about money. We borrow to the hilt and spend it as fast as we can."
It was the only way she and her family could "stay afloat." she said.
Copyright 2005 by Clyde List