The Wealth of a Nation

Adam Smith is often referred to as the father of modern capitalist economics. He was known to have said--"the decisions of individual owners to use their capital for their own gain, and of purchasers to buy for their own interests, would somehow be guided by an "invisible hand" to produce the greatest overall prosperity of society."
That was back in the day when money represented HUMAN productivity.  Needless to say our world financial systems have diverged from such a practical  measure.  Below is a clip from a piece that struck me as interesting, challenging and on some level bothersome.

Securities are ownership claims on a long-term stream of future 
cash flows. Paper gains don’t create
aggregate wealth, and paper losses don’t destroy it. Think of it this way. Suppose a security promises you a $100 payment 10 years from now. If you pay $32 for that security, you’ll get a 12% annual return on your money. If you pay $122 for that security, you’ll get a -2% annual loss on your money. Does the economy have more “wealth” in the second case? No. The security represents $100 in 10 years, regardless. Now, you may be able to sell the security to someone else for $122, and let them hold the bag over the next 10 years. In that case, you may end up with more wealth, but your gain will come at someone else’s loss. In short, aggregate wealth does not increase just because securities become overpriced. Aggregate wealth is not destroyed just because valuations normalize.

Put simply, many investors, and even some policy makers at the Federal Reserve, are under the delusion that paper market capitalization represents real wealth to the economy as a whole. The truth is that the wealth is in the productive assets of the economy and the long-term stream of cash flows they generate. Price fluctuations can certainly affect the distribution of wealth. Those who repeatedly buy stocks from others at depressed prices, and sell them to others at elevated prices, will accumulate the purchasing power of others. Those who repeatedly do the opposite will surrender their purchasing power to others. But the aggregate wealth of the economy as a whole is unaffected by those price fluctuations.

Source--John Hussman, PhD

This reminded me of the Adam Smith 'invisible hand" and how Alan Greenspan admittedly got it wrong in his application of that in today's world.  At a time when valuations seem high, human productivity is declining, and technology is eliminating jobs by the day we might be in need of a practical measure and the invisible hand more than ever.  Life and human conditions have never been better by many measures so reconnecting our money with our values might just make us all feel better about what is yet to come.