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Economics for the layman.
Economics: The science that deals with the production, distribution and consumption of commodities.
I have apples, you have oranges. I want oranges, you want apples. We trade. I give you apples and you give me oranges. How many of each depends upon the harvest and demand for both. This is barter.
I have apples, you have oranges. You want my apples but I don’t want your oranges. If you want my apples, you have to give me something that I can use to trade with somebody who has something I want. This is using a medium of exchange.
A medium of exchange in commerce is like using the lowest common denominator in adding fractions which have different denominators. 1/3 + 1/4 converts to 4/12 + 3/12 = 7/12
Since I am forgoing immediate satisfaction, this something has to have some value that the person with whom I am going to trade will want.
This something can be anything, any commodities or even service. But it has to have a store of value that is recognized.
Gold and Silver have historically served this purpose. Prices were measured in quantity of gold or silver. Gold or silver was the Unit of Account. which did not vary.
In some societies horses have been exchanged. In some societies, beads or salt. n war time cigarettes were used.
This medium of exchange must have some intrinsic value. That intrinsic value lies in its consumption or usage. The value may be temporary or of a lasting nature. If it is temporary, it must be used within a very short time in trade. If it has a lasting value, it may be kept for a long period of time before it is used.
Historically, precious metals such as gold and silver have been used. T hey are portable, and can be made into small coins. What gives them their value is their utility first and the desire for them second. Gold has the value of the metal itself and the value of the art that has been used to create the artifact. Silver the value of the metal itself as well as its utility. It has ornamental uses which has the value of the quantity of the metal itself and the added value of the created artifact. In addition to industrial use, silver has been used for rings, goblets, table ware. Same holds true for gold.
Gold and silver have been prized for thousands of years because of their intrinsic value. Intrinsic value is the use it can be put to and the demand.
Because of its intrinsic value, gold and silver have been used as a medium of exchange.
Paper has the intrinsic value of the paper itself. Compared to gold and silver its value is minimal. However, if the writing on the paper gives one the ownership of a stated quantity of gold or silver or any other commodity, it takes on the value of that commodity. This is a note. This piece of paper can be redeemed at a particular place for the stated quantity of gold or silver.
The quantity of gold or silver in a community can only be increased by mining it. This requires much labor. The gold and silver mines may be scarce.
The number on a piece of paper can be increased by the simple act of printing. When paper money was introduced, there was an equivalent amount of silver or gold in the warehouse. People who held these receipts (warehouse receipts) could go to the warehouse and redeem the gold or silver. When these warehouse receipts were increased beyond the amount of gold and silver stored in the warehouse, that is if every one who held these receipts went to the warehouse to redeem the gold or silver, some people would be left with a piece of valueless paper. This activity is a kind of economic musical chairs. When the music stops, somebody loses out.
Gold and silver has always been money. It is today. Federal Reserve Notes are neither notes, nor of the government. By legal tender laws they have become the Unit of Account. That is why the amount of Federal Reserve Notes to purchase a quantity of gold or silver is always changing. Because the Federal Reserve prints money without regard to the gold or silver, inflation is the result. Prices of goods and services continually rise. Paper money has value only as long as people have confidence in it and are willing to accept it. But history shows that this does not last. In other words, fiat currency, legal tender laws, which force people to accept it for debts public and private are a confidence game. And when people wake up to that fact, when the people lose confidence in it, the paper looses its value. At the time of the American revolution, paper for the war effort was created by the Continental Congress. These Continentals quickly lost their value.
From Wikipedia The Currency Act is the name of several acts of the Parliament of Great Britain that regulated paper money issued by the colonies of British America. The acts sought to protect British merchants and creditors from being paid in depreciated colonial currency. The policy created tension between the colonies and Great Britain, and was cited as a grievance by colonists early in the American Revolution. Early American currency went through several stages of development in the colonial and post-Revolutionary history of the United States. Because few coins were minted in the thirteen colonies that became the United States in 1776, foreign coins like the Spanish dollar were widely circulated. Colonial governments sometimes issued paper money to facilitate economic activity. The British Parliament passed Currency Acts in 1751, 1764, and 1773 that regulated colonial paper money.
During the American Revolution, the colonies became independent states; freed from British monetary regulations, they issued paper money to pay for military expenses. The Continental Congress also issued paper money during the Revolution, known as Continental currency, to fund the war effort. Both state and Continental currency depreciated rapidly, becoming practically worthless by the end of the war. Had the British Crown not illegally counterfeited hundreds of millions in Continentals, that currency depreciation would not have occurred to the extent it did.
From this comes the expression “It’s not worth a Continental.” U.S. Federal Reserve Notes are fast become contemporary “Continental currenty” “to pay for military expenses” “to fund the war effort” to fund programs which are not only unsuccessful but also unstainable.
“First, we need to rethink what the role of government ought to be, and fast. If we continue to think of our government as the policeman of the world and as the Great Provider from cradle to grave, our problems will grow worse and worse and our downward economic spiral, the first signs of which we are now witnessing, will only accelerate. The role of world policeman has made our country poorer and less safe. The welfare state likewise threatens our financial solvency and has caused the once robust institutions of civil society—which are no longer needed when government performs all functions ---to atrophy.” From: Ron Paul THE REVOLUTION a manifesto
In an interview with Candy Crawley of CNN according to Paul the causes of our present situation are:
Debt, Spending, Free money, Inflation, Too much government, loss of confidence in the free market, loss of confidence in liberty. He asks, “Where is the responsibility? Responsibility is on the individual and the family to take care of their need,, not the federal government. In regard to education he says that students get a pseudo education, there are no jobs, and they end up with debt.
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