The Economy

[Derfasciti]

This subject has always fascinated me. But I know I'm not knowledgeable about it at all. I'm trying to reall piece together how economies first started, how it evolved, how does importing/exporting work, If there is a capitalist nation how can there be embargoes on other nations?; If there's a nation that imports goods, is it the government or the consumer (i.e. merchants/business people) who directly order them from another country and then the government imports them?

I'm speaking mainly from the beginning of time until today of course.

Any info you guys can offer would be much appreciated.

[Colovion]

I don't think I can address everything, but hopefully a few of my thoughts can help:

The first writing (which I'm aware of) is on tablets in the Middle East which were forms merchants or farmers used to track their goods, sales and incomes. So really the first Economy began where you'd most expect it - in the cities the goods and wares were dealt. In those days there were no nations or governments besides petty and tribal chiefs, who likely would have had their own equivalents of accountants to tabulate their expenses and crop production.

As the world got more developed, those in power and those dealing directly with the goods became more efficient in their ability to buy and sell to the best of their advantage. At the time Importing and Exporting would've been known as Trade. Such endeavors weren't reliable until the last few hundred years - but humanity has always been keen on Trading with their neighbors.

[Marshal Murat]

The economy is basically supply-demand (lah-duh).

Farmer has an extra bushel of grain in his granary. The town to the north needs grain after disease kills off a couple fields of their grain. The farmer goes north, and barters for the grain.

Merchants are farmers who grow needed item (grain),but don't stockpile, instead they sell it at large. One town always needs grain, so you sell your crops there, bartering for something in return. You then barter that for grain elstwhere, at a profit.

Bartering gives way to buying and selling with a certain item. Gold is precious commodity, worth the same to all men in the nation. The gold replaces the bartering, allowing the merchant to accumulate more wealth to expand his crops and the amount he could sell.

The gold is sold for a certain amount of something, that fluxes on the amount needed and amount available.

[Derfasciti]

The economy is basically supply-demand (lah-duh).

Farmer has an extra bushel of grain in his granary. The town to the north needs grain after disease kills off a couple fields of their grain. The farmer goes north, and barters for the grain.

Merchants are farmers who grow needed item (grain),but don't stockpile, instead they sell it at large. One town always needs grain, so you sell your crops there, bartering for something in return. You then barter that for grain elstwhere, at a profit.

Bartering gives way to buying and selling with a certain item. Gold is precious commodity, worth the same to all men in the nation. The gold replaces the bartering, allowing the merchant to accumulate more wealth to expand his crops and the amount he could sell.

The gold is sold for a certain amount of something, that fluxes on the amount needed and amount available.

Why gold? Why Silver? Why not paper in the beginning or like standardized stones lol

[Csargo]

Why gold? Why Silver? Why not paper in the beginning or like standardized stones lol

Cause it's shiny.

Gold and Silver have always had a value as money.

[Slartibardfast]

Real economies developed for Subsistence purposes, which is the economic model that seems to be left out of most 1st year economic curriculums over the last several years.

Other economic models consist of Market Controlled in which business carries on with little interference from the State(The USA) known politically as the Far Right, State Controlled in which the economy is highly regulated by the central government(The USSR) known politically as the Far Left, and Mixed where trade is fairly free under modest regulation from by the State(Australia c.1970-80.)

The rise of Socialism in South America is a push towards a more State Controlled economy in reaction to the obscene poverty and disenfrancising of the populous caused by the rapid adoption of the far right "Reaganomics" there two decades ago.

To understand the economic principles behind the far right Market Controlled economies espoused by the USA and John Howards Australia I recommend using the thought pattern as outlined below. (Got me distinctions in Economics I & II at NSW TAFE three years ago.)

"Do whatever is necessary to make life worse off for the majority of people, the majority of the time, and make it all sound like fiscal responsibility with low interest rates."

This is the reason why in a major food exporting county like Australia, we as a nation, will be suffering critical food shortages for the first time since federation in 1901. Food prices are set to rise 30% here within the next few months due to following the above principles, its associated ideological thought patterns,ie:the economy is more important than people or the envioronment.

"Co-incedently, when the revolution did come they were the first group to be placed against a wall and shot."-Hitch Hikers Guide To The Galaxy.

[Papewaio]

Why gold? Why Silver? Why not paper in the beginning or like standardized stones lol

Rarity, portability, durability and probably most importantly 'the magpie effect' ie shiny.

Paper is not easy to make rare or durable, Paper is also what I will term 'faith' based transaction.
Stones that are not rare would lead to rapid inflation, this would devalue the value in each stone. This in turn would make the money not portable. Last week you bought a loaf of bread for a stone. Next week you have to use a wheelbarrow full of stones to buy the loaf because your neighbours are getting stones out of a quarry.

[Marshal Murat]

Money began as bartering, black for white. Equal trade.
Then, it was revealed that gold was valued by all (shiny). Man enjoys having it, and uses that to buy goods. Gold can be bartered for almost anything.
Then, when there was a lot of gold, the value of it decreased, and you had to carry five gold coins in place of one. This made the pouch heavy, and bandits can snatch something heavy.
So the Chinese had a sort of faith-based money system. Paper replaced gold, and the paper pretty much said
1 gold coin is behind this 1 piece of paper. If you give this paper to the man who signed this paper, he can give you a gold coin.
Islam and China had this banking system, where paper could be traded for gold, and used in place of gold coins themselves. When the Europeans took on banking, it expanded.

Banks are basically this.
We hold your money, and give you money for your money. We then use your money to help people out. They pay us back, plus interest. Banking allowed many people (Medici's, Fugger) to call in political favors, or use the money to fund lifestyles.

Checking is similar to paper money, where the paper says "Bank A has this money, ask them and you will recieve."

Stocks are different than money in general.
Stocks are part of a company that generates revenue, and trades goods for profit. If you have a stock in Electric Company, you own part of that Company, having given money to that company so you may get money back. If the Electric Company can build a Nuclear Plant, and no-one else can, they generate more power, and can supply more people, earning more money.
When this happens, more people wish to buy part of this company, and the price of the stock goes up. More people want this stock, and there is only so much to go around.
Then, if Nuclear Plants can be proven to cause death, stock goes down, and the stock becomes cheaper. If you sell at the high, you can get a profit over how much you invested in the company.
Basically, it's Buy Low, Sell High.

How about manufacturing? Is this part of the discussion?

[Ice]

Rarity, portability, durability and probably most importantly 'the magpie effect' ie shiny.

Paper is not easy to make rare or durable, Paper is also what I will term 'faith' based transaction.
Stones that are not rare would lead to rapid inflation, this would devalue the value in each stone. This in turn would make the money not portable. Last week you bought a loaf of bread for a stone. Next week you have to use a wheelbarrow full of stones to buy the loaf because your neighbours are getting stones out of a quarry.

Exactly. The more currency you have, the less it's worth. Gold and Silver are rare and hard to forge, thus they make good currency.

[King Henry V]

Money began as bartering, black for white. Equal trade.
Then, it was revealed that gold was valued by all (shiny). Man enjoys having it, and uses that to buy goods. Gold can be bartered for almost anything.
Then, when there was a lot of gold, the value of it decreased, and you had to carry five gold coins in place of one. This made the pouch heavy, and bandits can snatch something heavy.
So the Chinese had a sort of faith-based money system. Paper replaced gold, and the paper pretty much said
1 gold coin is behind this 1 piece of paper. If you give this paper to the man who signed this paper, he can give you a gold coin.
Islam and China had this banking system, where paper could be traded for gold, and used in place of gold coins themselves. When the Europeans took on banking, it expanded.

Banks are basically this.
We hold your money, and give you money for your money. We then use your money to help people out. They pay us back, plus interest. Banking allowed many people (Medici's, Fugger) to call in political favors, or use the money to fund lifestyles.

Checking is similar to paper money, where the paper says "Bank A has this money, ask them and you will recieve."

Stocks are different than money in general.
Stocks are part of a company that generates revenue, and trades goods for profit. If you have a stock in Electric Company, you own part of that Company, having given money to that company so you may get money back. If the Electric Company can build a Nuclear Plant, and no-one else can, they generate more power, and can supply more people, earning more money.
When this happens, more people wish to buy part of this company, and the price of the stock goes up. More people want this stock, and there is only so much to go around.
Then, if Nuclear Plants can be proven to cause death, stock goes down, and the stock becomes cheaper. If you sell at the high, you can get a profit over how much you invested in the company.
Basically, it's Buy Low, Sell High.

How about manufacturing? Is this part of the discussion?

Stocks also pay an amount annually known as a dividend, i.e a portion of the company's profits for that year. Of course, is there is no profit, no dividend willl be payed and it will vary from year to year. There's also no security if the company goes belly-up: you lose everything you invested.
Another thing are bonds. These are in fact loans to a business which in effect one "buys" from the company. The interest paid annually on bonds is fixed, and the debtor can reclaim his money should the company go bankrupt.

The above was really developped at the end of the 17th century with the huge expansion of mercantilism and the rise of the consummer society as described by Daniel Defoe.

[Derfasciti]

If gold was/is such a good currency, then why don't we use it now? Since it seems to stave off inflation.

And another thing: How exactly does inflation work? It seems to me that having very little money may be a good thing since it's now worth so much.


Thanks for all the replies by the way. Pretty informative

[Kraxis]

Rarity, portability, durability and probably most importantly 'the magpie effect' ie shiny.

Paper is not easy to make rare or durable, Paper is also what I will term 'faith' based transaction.
Stones that are not rare would lead to rapid inflation, this would devalue the value in each stone. This in turn would make the money not portable. Last week you bought a loaf of bread for a stone. Next week you have to use a wheelbarrow full of stones to buy the loaf because your neighbours are getting stones out of a quarry.

Agreed...

And I refer to Douglas Adams when he has the unneeded telephonebooth cleaners, marketers ect ect. invent currency. They use leafs... Pretty damn stupid as everybody can pluck leafs from trees and bushes. Then follows a lot of stupid actions as a result of this inflation (attempts at burning the forests and the like).

While it is a rather absurd situation, and the people have less between their ears than there is in the vacuum of space, it is actually not wrong in any way. It brings up the absurdity of us actually using paper as money.

[Sarmatian]

If gold was/is such a good currency, then why don't we use it now? Since it seems to stave off inflation.

And another thing: How exactly does inflation work? It seems to me that having very little money may be a good thing since it's now worth so much.


Thanks for all the replies by the way. Pretty informative

Inflation is good, in moderation. It stimulates investments and exports. So 1-2% inflation a year is positive. More than that is not good.

We don't use gold/silver any more because paper is more practical. Now countries have central banks, and it is possible to control the amount of money circulating.

[Kraxis]

Inflation is good, in moderation. It stimulates investments and exports. So 1-2% inflation a year is positive. More than that is not good.

We don't use gold/silver any more because paper is more practical. Now countries have central banks, and it is possible to control the amount of money circulating.

Actually we use 'fictional' money even more than paper. We have less than 10% of our monetary value 'on paper' as it is.

So we have a very dynamic, fast and terribly unstable economy. If for instance the stock markets and currency speculators would go into a panic, we would suffer heavily, as that would impact the 'fictive' money greatly.

Also, we don't have enough gold to spread out for us all to use. Gold i very rare, and we don't really get much more of it as it is getting so hard to get that it is often not worth it.
But gold is good as a sort of backup, and many countries still have gold reserves for a bad day. But many others don't hold any gold anymore.

[Aracnid]

Actually gold is generally regarded by most economists as an expensive luxury. While it is a flee resource (something that people buy when they are nervous so they invest in something that is "safe" and permenent i.e. gold) and useful to individuals and companies. At the macro economic level building up a realistic gold reserve is massively expensive (e.g. the US would need to buy up 2/3rds of the world supply of gold to get back onto the gold standard, impossible) and wouldn't be all that useful in a a crisis.

[Kralizec]

Trivia: the first known economic embargo was made by Athens in the winter of 433-432 against Megara. This caused one of the (many) tensions that led to the Peloponessian war.