NOTE: This is based on Kinesian (kin-eez-ee-an) Economics, the theory that work is the source of almost all economic value. Its name comes from Kinesiology, the study of human motions.

Kinesian Economics is not to be confused with Keynesian (Keen-zee-an) Economics, the theory that government is a major source of wealth. Keynesian Economics is named after economist John Maynard Keynes. Keynesian Economic Theory doesn't work, because it fails to consider work as the source of wealth.

Politicians often believe that if a person has money, he has wealth. That is not always true. Here are the differences between wealth and money:

The properties of money:

1. Creation of money:
   • Money, in the form of currency and government securities, is created by government.
   • Banks, mortgage companies, public companies issuing stocks and bonds, credit card companies, and other lending institutions also create money when they make loans.
   • The Federal Reserve Bank has some control over the amount of money in the economy (called the money supply). It can print or destroy currency, and it can sell or buy treasury bonds.
   • Counterfeiting temporarily increases the supply of money until the bogus bills are detected and removed.
   • Money can be created without any wealth changing hands.
2. Consumption of money:
   • Money is not normally consumed.
   • Money is temporarily consumed when it is saved for later use without being deposited in banking institutions. This effectively removes the saved money from the money supply until it is spent, because it is not circulating.
   • Money that makes its way into coin collections is effectively consumed.
3. Expansion of money:
   • Money is expanded whenever it is loaned, because both the lender and the borrower can claim it as an asset.
   • Purchases made on credit cards, even if the balance is paid off with each bill, expand the supply of money, because both the store and the cardholder have what is essentially the same money at the same time.
4. Trade without money:
   • Barter exchanges wealth without the use of money.
   • Money in the absence of any wealth is worthless.
5. Destruction of money:
   • The Federal Reserve Bank has some control over the amount of money in the economy (called the money supply). It can print or destroy currency, and it can sell or buy treasury bonds.
   • Accidents can temporarily destroy money until the loss is reported and the money is replaced.
6. The necessity of money:
   • A convenient medium of exchange is needed. If a valuable commodity is used for money, it cannot be used for its own purpose.
   • Money is used to store the Kinesian wealth a worker creates, to be held until he needs to use it.
   • Money is a standard of value that is accepted over a wide area without question.
   • Without money, it would be very hard to make the correct change in the course of trade. Having many different denominations of money makes this easy.
7. The limitations of money:
   • Money itself is not necessary to life. It must be able to purchase the necessities of life to be valuable.
   • Without a creation of Kinesian wealth to be purchased, money does a person no good at all.
   • Some politicians link the circulation of money to a strong economy. But without the creation, exchange, and consumption of Kinesian wealth, the circulation of money by itself represents an empty economy.
   • If the money supply increases too fast, inflation results.
   • Inflation also results when laws restrict a market through wage or price controls.
   • If the money supply is too small, the economy collapses, because merchants can not make small enough change for purchases to occur.
   • A too-small money supply can also cause the stock market to crash. This happens when stock cannot be liquidated to supply needed currency because there is a shortage of currency.

The properties of Kinesian Wealth:

1. Creation of Kinesian Wealth:
   • Government cannot create any wealth.
   • The primary source of wealth is the work done to make products or services to be sold.
   • Facilitating the sale of services and products (such as being a sales clerk or a forklift operator) also is a primary source of wealth.
   • Both physical work and mental work create wealth.
   • Work done to prolong the life of a product is a secondary source of wealth.
   • Voluntary donation to those truly in need is a secondary source of wealth. Note that it must be voluntary.
   • Work done to train people to work creates future wealth.
   • Kinesian Wealth can be created without money changing hands.
   • The presence of money does not necessarily indicate the presence of Kinesian Wealth.
2. Consumption of Kinesian Wealth:
   • Wealth is consumed whenever food is eaten.
   • Wealth is consumed whenever something wears out.
   • Rent, housing, medicine, and other needs consume wealth.
   • Using power and other utilities consumes wealth.
   • Entertainment and recreation consume wealth.
3. Expansion of Kinesian Wealth:
   • Wealth is expanded whenever the food and drink consumed by a person are used as fuel by that person to do work, which creates more wealth than the amount of wealth consumed. This is regeneration of wealth.
   • Delayed expansion of wealth occurs when nurture, education, and time turn a child into a worker.
   • Wealth production is expanded when new factories open and new products come on the market.
4. Non-production of Kinesian Wealth:
   • Work done without producing a salable product or assisting in the production or sale of a product produces no wealth.
   • Working to create products that nobody wants to buy creates no wealth.
   • Philanthropic giving to an able-bodied person who refuses to work creates no net wealth. The wealth created by the giving is destroyed by the refusal to work.
   • Hobbies produce no wealth unless the products so made are sold. But if the hobby teaches a useful skill which can then be used in work, the hobby creates delayed wealth.
   • Producing shoddy products creates no wealth.
5. Destruction of Kinesian Wealth:
   • Work done solely to satisfy government requirements destroys wealth.
   • Paying a worker with more wealth than the amount of wealth he creates by working destroys an amount of wealth equal to the difference.
   • Taxation of over 10 percent of any personal or business income destroys wealth.
   • Giving tax revenue to an able-bodied person who refuses to work destroys that much wealth.
   • Breaking or damaging something destroys wealth.
   • Traffic accidents destroy wealth.
   • Thefts and other criminal activities destroy wealth.
   • Vandalisms and destructions of property destroy wealth.
   • Fires and natural disasters destroy wealth.
   • Fraud destroys wealth.
   • Political campaigns destroy wealth.
   • Price controls destroy wealth.
   • Business failures destroy both wealth and wealth production.
   • Minimum wage and living wage legislation both cause business failures, and destroy both wealth and wealth production.
   • Gambling destroys wealth.
   • Spreading AIDS and other diseases destroys wealth.
   • Monopoly powers destroy more wealth than they create.
   • Patents and copyrights are monopoly powers, and destroy more wealth than they create.
   • Forced obsolescence of products destroys more wealth than it creates. The required change to HDTV is an example of this, as is Microsoft's required change of operating system every three years.
   • Government regulations that cost people money destroy wealth.
   • Government seizures to satisfy tax liens destroy wealth.
   • Government spending on nonessential items destroys wealth.
   • Labor union rules that cost a company or a worker money destroy wealth.
   • Welfare payments destroy wealth.
   • All attempts to get something for nothing destroy wealth.
6. The limitation on the supply of Kinesian Wealth:
   • The number of workers in the world is finite.
   • The amount of work any one worker can do within a given time is finite.
   • Thus, the supply of available work is finite.
   • All people have to consume wealth by eating.
   • Entitlements consume wealth.
   • All forms of entertainment and recreation consume wealth.
7. The necessity of Kinesian Wealth - a chain of necessities:
   1. The earth cannot produce enough food for the population without the work that farmers do.
   2. The farmers must be compensated for the work they do.
   3. All of the people must do work in order to compensate the farmers for the food they eat.
   4. The work done by the farmers, and the work done by others, produce the Kinesian Wealth necessary for the economy to work.
8. The impossibility of creating Kinesian Wealth out of nothing:
   1. Most socialist and "living wage" plans rely on a law to force businesses to pay workers more than the wealth they produce when they work.
   2. Since a business cannot create wealth out of nothing, paying out more wealth than the workers create causes a net loss of wealth.
   3. Since the business loses wealth, it cannot possibly last very long. Once the assets are gone, the business folds.
   4. Since government cannot create any wealth, there is no source of wealth left to feed the people with.
   5. Eventually the system, instead of making things better as it promised, destroys all of the wealth in the country.
9. More about wealth:
   1. THE MISSING EQUATIONS

The interactions between money and wealth:

1. Changes in the money supply do NOT change the amount of Kinesian Wealth. Instead, a change in the money supply makes each individual unit of money change the amount of wealth it will buy. If the money supply increases, each unit of money will buy less wealth.
2. Changes in the amount of Kinesian Wealth do NOT change the supply of money. Instead, a change in the amount of wealth makes each individual unit of wealth cost a different amount of money. If the amount of wealth in the economy increases, each unit of money will buy more wealth.
3. The amount of money in the world is a lot smaller than the amount of wealth, because the same money is constantly exchanged again and again during the production, sale, consumption, and destruction of wealth.
4. The amount of wealth in the world is a lot larger than the amount of money, because wealth is constantly being produced, sold, consumed, and destroyed, while the same money circulates again and again.

Why individuals end up paying most business taxes:

Here is the chain of how business taxes must be passed on to workers and consumers:

1. Taxes must consume Kinesian Wealth.
2. Businesses do not by themselves produce much Kinesian Wealth. The workers the business hires produce most of the wealth produced by business.
3. Since the business has very little Kinesian Wealth of its own to be taxed, the wealth needed to pay business taxes must come from either the worker who made the product (through lower wages), or from the consumer who worked somewhere else to create the wealth and earn the money to buy the product, or from both.
4. The individual ends up paying the tax when he works at a reduced salary (because of business taxes reducing the amount available to pay workers) and also when he pays increased product prices (which include business taxes passed on to consumers).
5. Most businesses MUST pass on all business taxes to consumers and workers, because the business has no independent supply of wealth from which to draw such funds from.
6. So the workers, being the only major source of Kinesian Wealth, ends up working harder to pay all business taxes.

Why living wage legislation is an impossible dream:

• Why a living wage law and a government safety net cannot coexist:
  1. The worker creates only a certain amount of Kinesian Wealth when he works. His capacity to produce wealth is physically limited.
  2. Remember, government has no power to create wealth, so it can't subsidize this. The taxes needed to run either the living wage subsidy or the safety net must come from the wealth created by the workers, canceling out any gains the workers would get from the legislation.
  3. The sum of the living wage, normal taxation, and the amount spent per capita on a safety net, cannot exceed the amount of wealth the worker creates.
  4. If only part of a population is covered by a living wage law, the rest of that population will end up paying for it.
  5. Once the cost of the safety net is subtracted from the wealth created by the worker, there is not enough left for a living wage. So the worker ends up having to work much harder, to earn the equivalent of three salaries - one for himself, one for government, and one for the safety net.
  6. Adding national health care insurance to the mix makes it even worse. Now the worker has to earn in effect 4 salaries just to support himself and these bloated overindulgences of government.
  7. Only one of the three entitlements can exist at any one time. There can be a living wage, OR there can be a safety net, OR there can be full health insurance coverage. But no two of them can exist at the same time, because each one needs more than half of the tax revenue to operate.
• Why living wage legislation cannot give the worker more buying power:
  1. Legislating a living wage does NOT increase the amount of wealth produced by the worker, because the worker does no more work.
  2. If the money value of the pay exceeds the amount of wealth produced by the worker, the currency must inflate until the pay equals the amount of wealth produced by the worker.
  3. The inflation reduces the buying power of the worker to where it was before the living wage legislation passed.
  4. Nothing government does can prevent the currency from inflating without driving many businesses out of business.
  5. Attempts to prevent the inflation by setting price controls on products will result of the removal of those products from the market and loss of the jobs of the workers making the products. No business can continue to exist when it is ordered by government to operate at a loss.
  6. Since government cannot create wealth, it cannot possibly subsidize a living wage. The wealth needed for any subsidy is created by the workers, and so is taken from the workers, no matter who is actually taxed.

The only way to make a living wage exist is to cut taxes to the point where both of these are true:

• No worker is taxed more than ten percent of his income.

• No person under the poverty line is taxed at all.

Links:

• THE KINESIAN THEORY OF THE ECONOMY
• KINESIAN ECONOMY IN ACTION
• Only Workers Pay Taxes
• The Living Wage Scam
• THE MISSING EQUATIONS
• Stupid government tricks
• Home