The positive response I received about the paradox of China led me to think about the underlying focus of money in both the United States' and Chinese economies. Investing on the basis of daily stock market reactions to news of China's actions makes little sense. Short-term day traders are gamblers masquerading as investors. Gambling uses money as an object, not as a token of value. A long-term view about money and how it can be used as an investment may be difficult if you don't have enough money to pay the monthly bills and mortgage. Look at what does matter about money.
Research shows that no matter how much money a person earns, a majority think they need to earn more in order to feel wealthy. In fact, many people confuse income with wealth. To put the subject of money in perspective, I quote from a recent essay by Lewis Lapham, Editor of Lapham's Quarterly.
For the last twenty-seven years, the news and entertainment media's relentless booming of the markets' incredulity, stimulated by the government's doping of the banks with injections of access to cheap credit (a policy endorsed by President Clinton and both Presidents Bush), has raised and fattened a large herd of eager converts to the faith in golden calves. What is striking is the degree of their paralysis in the attitudes of holy dread. Never in the history of the world have so many people been so rich; never in the history of the world have so many of those same people felt themselves so poor. They stare into the mirrors of their well-publicized magnificence, the happiest and freest people ever to have seen the light of day, and because they expect from money more than money can supply, they're disappointed to see a face unlikely to launch a rowboat, much less a thousand ships.
I agree with Lapham's point of view that many American people today expect money to answer all of their woes, and that they expect an eventual return to cheap credit and high returns. Both assumptions are wrong. Investors today may have to follow an old-fashioned model, and rather than invest in stocks, support an entrepreneur whom one knows and trusts. Individuals who use the wealth they have or a windfall they earn to build a business will use money in a productive matter, rather than gamble it in unproductive markets.
Investing to Innovate
We read and hear about what we have lost in the markets or in savings rather than what we can do with an investment. A great example of someone from humble beginnings who was laid off and then invested for innovation is Jimi Heselden. He began his life in Leeds, England, and dropped out of school to work in a coal mine at age 15. When he lost his job in the United Kingdom's nationwide mining strike in 1984, he used the unemployment compensation to found a company called Hesco Bastion. After six years, the company created a product called a Concertainer unit. These units were used for flood and erosion control. Not only did water companies use them, but the British army used them for protective walls during the 1991 Gulf War, and BP used them during the recent Gulf oil spill to protect the shoreline. From one simple idea, he and his company created rapid-response containers to house and protect people and property. He became a multi-millionaire with a 2009 estimated wealth of US $339 million, donated significant funds to the community and recognized that work and luck helped him innovate.
In this interconnected world, we don't know where the next great idea will arise. But, one thing is certain. It's not easy to choose what to invest in. However, having realistic expectations of a return from money invested and working on an innovation that can fill a need in the marketplace is a better way to feel and be rich. If we don't invest and innovate, we will not shape the future, but be slaves to it. If we use seed capital for gambling, we won't progress. The Chinese saying from Lao Tzu goes, "Give a man a fish, feed him for a day. Teach a man to fish, feed him for a lifetime" may need an addendum: "You can then sell him bait and fishing poles."