Author Topic: A quick lesson in basic economics ...  (Read 51 times)

Offline Baruch (OP)

A quick lesson in basic economics ...
« on: July 07, 2017, 07:04:30 PM »
In traditional economy, there are three flows. The real economy is agricultural, along with what is required to prosper agriculture. To prosper agriculture there has to be labor specialists, usually in villages or cities, that provide non-agricultural products and services. The monetary flow is bifurcated, between a liquidity flow and a money-as-commodity flow. The liquidity needs to be sufficient to cover all transactions, no more, no less. Originally money-as-commodity flow was based on the currency as physical asset with some market value. Metal money for instance; gold, silver or bronze. Eventually with the rise of banking, paper money became viable as commodity money, with the paper money being commoditized by … interest (implicit or explicit) and money markets. We left the traditional economy behind, when we dropped all connection of the paper money with metal money, so that the government/commercial combine was free to expand liquidity and financial asset at will. We have yet to see what will come of the non-traditional economy … which minimizes agriculture, minimizes metal money, maximizes non-agriculture products and services, and financializes everything (making everything into paper money or the equivalent).

The present time is always an open ended experiment in the unknown.  Simple examples to follow.