Mike Ock wrote:@innairobi that is correct. Also imagine the cases of startup guys, they get some funding and their companies are worth a lot of money on paper, but all the cash is being used to run the business, the entrepreneurs are usually broke beyond belief, despite running a multimillion company.
That's why it's important to count liquid wealth. That is attached to spending power.
Actually the start-up guy's wealth would be calculated even if he's dead broke in his pocket. Most guy's building wealth understand cash at hand is worthless.
The concept of wealth as calculated by Economists is much related to GDP; how much do you contribute to the GDP?.
Remember GDP is how much wealth is circulating within an economy, not how much it's worth.
Example; if you have a 100m home in Karen where you employ 1 watchmen at 60k per year, then your contribution to the economy is 60k for that year.
If however you live in Kitengela and have a pub employing 20 waitress 1.2m per year, then your contribution to the economy is 1.2m.
Wealth and liquidity also have no correlation. A 90year old with 10m in the bank living hand to mouth in Nyeri fall in the same category as a 'poor' masai who has 1000 acres of land.
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