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There is no doubt that you want to your business to thrive in these economic times. To accomplish this you need to have a clear understanding of the fundamental shift in value transfer that has taken place in the last year.
Most economists define their science as the study of human behavior in relation to the production and distribution of scare resources in an environment of unlimited demand. They measure the size of the economy in dollars, yen, or euro. News of woe spreads quickly when the metrics show signs of slack. There is typically a call for government initiated stimulus as we have seen in recent months.
The truth about the economy is this: You cannot build an objective metric to determine the size or health of the economy. In the United States, there has been over $500 billion in circulation throughout the past several years. However, this limited supply of money changes hands multiple times a year allowing the economy to be measured in trillions of dollars. This concept is called the velocity of money.
Most people intellectually accept but emotionally fail to recognize that the money they use has no intrinsic value. It is simply an idea. If you and I exchange goods and services for cash or credit, we have faith that we can later use the cash or credit to exchange for other goods and services. Money only has value when it is actively being used as a lubricant of exchange, yet people react with intense emotion when their source of money is threatened.
Money, or currency, is simply a culturally accepted norm that allows exchange to occur easily in the region in which the money is accepted. Currency is, in truth, nothing more than an idea. It is the idea that you can use the paper, coin, or credit to exchange for something else. The widespread acceptance of the idea is based on faith that others will accept the currency in exchange for whatever you desire.
What is it that one exchanges for currency?
This question should be contemplated by everyone. Here is a brief answer: We exchange something we value less for something we value more. Consider the exchange of your time for money if you have a job. You value your time less than you value the money you earn for your time. It is not the money itself that you value, but what you can buy with that money. Clothes, food, and a house are all available to you if you have money. Again, it is not that you value your time less than these things as much as it is that you value the feelings of security, happiness, etc. that arise when you think of these things. That is why you exchange your time for these things while using money as the lubricant for the exchanges.
Value is not something that can be objectively measured. It can be prioritized and even given some relative comparison of magnitude, but it cannot be measured strictly in dollars and cents. Value is a subjective measure while money is an objective measure. We attempt to use money as a universal proxy, but it often fails to be adequate.
Value is created in the mind of the would-be consumer when he thinks about the emotional state that will result as the product or service is consumed. The perceived value is exchanged at the moment of the transaction. The value is realized as the consumer actually uses or engages the product or service and feels the emotions associated with consumption.
Economists who strictly measure the size of the economy using the amount of money that was exchanged fail to recognize a growing segment of value transfer that is taking place. With little or no money, ideas are being transferred through intelligent information, emotional engagement, or relationships in communities. These too are forms of currency which lubricate exchange and create value.
This understanding of value is critical today because we have seen an immeasurable growth in value in recent years. It is not just the abundance of basic products or services at a low cost, but the abundance of alternatives with high-design that trigger emotional responses that need to be considered. In addition, the abundance of virtually free information and boundary-less communities creates tremendous value in the minds of consumers. This value changes hands with minimal or no money involved.
We have reached an economic state of development where abundant information, products and services are combined with the relatively inexpensive development and distribution systems. In this situation money as we knew it just a few years ago, is relatively meaningless. It is my opinion, based on experience and research, that the increase in the exchange of value through information, emotional engagement, and relationships rather than through the use of money has reached a critical mass. A similar situation can be found historically every time a culture shifts from its accepted form of currency to a more intangible, more abundant form of currency.
As societies become less focused on survival and more focused on higher levels of existence, one can trace the change of the primary form of currency from real estate to precious metals to paper to credit. With each change, the currency became more readily available, more easily transferable, more governed by ideas—or rules—than by physical measurements, and more intangible. The currency also became more inflatable in response to the rapid expansion of value in the economy of the day. There historically was also an economic crisis as a result of the change in currency because contracts were negotiated on the previous monetary standard and were not easily converted to the new standard.
Today, we are experiencing a similar ultra-rapid expansion of value. The money in circulation cannot circulate fast enough. This is why the rules governing the expansion of credit were stretched for consumer loans and mortgages, the hedge funds were manipulated, and the economy as measured by monetary standards grew so rapidly. When there was no longer faith in a system that is so stretched and contorted, it took a small doubt to lead to worry which caused a wave of fear. As the financial institutions reacted to the situation and contracted their rules, the velocity of money decreased causing the constriction of the monetary metrics in the economy.
Don’t be fooled though. This economy is abundant. Tremendous value is being exchanged even if the money is not available. Those who understand how to exchange value when money is tight are the ones who will thrive now and later as the new currency is more widely accepted.
My articles over the next few weeks will specifically address how you can use the abundance in the economy today to attract more business and the money you need to pay bills.
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About Tony Bodoh
You can contact Tony Bodoh through tony.bodoh at gmail.com or 877-826-2521.
Tony Bodoh is the CEO of Tony Bodoh International. His firm coaches executives to create organizational alignment. With a focus on aligning the thinking, relationships, and processes of an organization, Bodoh has a track record of creating extreme value for customers. See www.profitornado.com for more information about Bodoh’s coaching.
Bodoh also uses his expertise to help professionals build successful and significant relationships with their families. As President of Daddy Daughter DaysTM, Bodoh produces live or recorded teleseminars and workshops.
If you are interested in improving your family’s relationships, please visit http://www.podclass.com/tonybodoh to learn more about Bodoh’s workshops.
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