Economics & Morality
Posted: Mon Dec 21, 2009 3:13 pm
In case you haven't seen it:
Economics & Morality
I'm looking to have a discussion with anyone who has some good answers to my questions (please don't refer me to wiki). Whenever I think about economics, I always find myself frustrated with the terminology and generalizations, and more interested in actual real life, cause and effect chain reactions and details which cause an economy to gradually change.
At the 1:49min mark, Kevin talks about how the more money the government prints, the less people trust it, and thus it's value decreases.
I can't help but think that that "trust" is a misleading term, I just don't find it coherent.
For instance, how would "the people" have any clue about the money supply increasing? Is it really about trust, or is it about scarcity of resources combined with too many people competing to make use of those resources?
It seems like a big aspect of hyperinflation is the desire to establish a large quantity of businesses and assets, but this desire is irrational in the same way it's irrational to try investing a large amount of work into producing a large quantity of crop when the soil is only good enough to produce a small quantity of crop.
For instance, the government might lend money to produce 30 large scale farms, but the soil in the nation can only support 5 farms. Likewise, the government lends money to support 20 aspiring oil companies, but there is really only enough oil within the nation to support 2 oil companies.
This is what I think the problem is in Zimbabwe. Perhaps the government started off with inflated expectations and hopes. It wanted to see a large quantity of businesses emerge, so they lent too much money to too many people, hoping that the money would be spent wisely to increase businesses and net revenue. But since resources were so scarce, and since each person who wanted to start or grow their own business had so much money loaned to them, a bidding war for (scarce) commodities ensued. After the commodities were all bought up for expensive amounts, the basic products that ended up on the market were unusually expensive.
So what's wrong with having your basic goods such as corn and bananas expensive?
It's problematic when your consumers aren't getting paid enough to buy anything but those basic goods. They can't afford to buy any extras like furniture, cars, etc.
My theory is that hyperinflation is set into motion because the inflated ambition/demand of government to produce a large quantity of businesses does not correlate with available commodities need to realistically support all those businesses, and thus, after a bidding war ensues, the products not only end up becoming more expensive, but half of the businesses go under, because their weren't enough commodities to go around. Too many businesses, not enough commodities. And so people lose their jobs, and thus demand for higher end goods goes way down, and all you're left with is the over priced basics.
At one point in the video, Kevin mentions how the rich people with all the money buy up the houses, furniture and possessions of the poor.
I have no doubt this is true, but as I already alluded too, aren't the rich people (the people the government will lend money to) buying up ALL commodities, with the hope to profit?
Too many people who borrow money are spending it on things that they hope to resell, but they CAN'T resell. There's no demand for the things they have too much of (luxury, houses, furniture, jewelry), and there's too much of a demand for the things they have no supply of (agriculture, coal, oil).
I assume the poor are eager to sell their houses and possessions because their employers aren't paying them money due to overestimating what the revenues would be of basic things like farms. Lower/middle class workers, because they are getting fired, can no longer afford to meet monthly costs so they try to transition down into a lower standard of living they can afford to maintain.
However, once they get down there, they notice that what was $10 last month, is now $50.
I assume Zimbabwe must have a dying agriculture, and part of their problem might be that they are importing most of their food, and they are being charged outrageous amount of money by other nations.
I would not be surprised at all if Zimbabwe's hyperinflation is partly caused by other Nations charging ridiculous amount of money for basic things. And the reason other nations are charging so much money, is because Zimbabwian dollars is all Zimbabwe has to give, and who the fuck wants to live in Zimbabwe? They have no commodities, no infrastructure, no quality of life. Nobody wants to visit Zimbabwe. So Nations are charging outrageous amounts of Zimbabwean money, because...........they don't trust it. A-ha...
I hope someone out there enjoyed my rant. To the reader: I'd like to hear your thoughts on this. I do realize what I have written probably has some significant flaws, I'm mainly just letting my intuition guide me in an effort to spark some kind of worthwhile discussion.
Economics & Morality
I'm looking to have a discussion with anyone who has some good answers to my questions (please don't refer me to wiki). Whenever I think about economics, I always find myself frustrated with the terminology and generalizations, and more interested in actual real life, cause and effect chain reactions and details which cause an economy to gradually change.
At the 1:49min mark, Kevin talks about how the more money the government prints, the less people trust it, and thus it's value decreases.
I can't help but think that that "trust" is a misleading term, I just don't find it coherent.
For instance, how would "the people" have any clue about the money supply increasing? Is it really about trust, or is it about scarcity of resources combined with too many people competing to make use of those resources?
It seems like a big aspect of hyperinflation is the desire to establish a large quantity of businesses and assets, but this desire is irrational in the same way it's irrational to try investing a large amount of work into producing a large quantity of crop when the soil is only good enough to produce a small quantity of crop.
For instance, the government might lend money to produce 30 large scale farms, but the soil in the nation can only support 5 farms. Likewise, the government lends money to support 20 aspiring oil companies, but there is really only enough oil within the nation to support 2 oil companies.
This is what I think the problem is in Zimbabwe. Perhaps the government started off with inflated expectations and hopes. It wanted to see a large quantity of businesses emerge, so they lent too much money to too many people, hoping that the money would be spent wisely to increase businesses and net revenue. But since resources were so scarce, and since each person who wanted to start or grow their own business had so much money loaned to them, a bidding war for (scarce) commodities ensued. After the commodities were all bought up for expensive amounts, the basic products that ended up on the market were unusually expensive.
So what's wrong with having your basic goods such as corn and bananas expensive?
It's problematic when your consumers aren't getting paid enough to buy anything but those basic goods. They can't afford to buy any extras like furniture, cars, etc.
My theory is that hyperinflation is set into motion because the inflated ambition/demand of government to produce a large quantity of businesses does not correlate with available commodities need to realistically support all those businesses, and thus, after a bidding war ensues, the products not only end up becoming more expensive, but half of the businesses go under, because their weren't enough commodities to go around. Too many businesses, not enough commodities. And so people lose their jobs, and thus demand for higher end goods goes way down, and all you're left with is the over priced basics.
At one point in the video, Kevin mentions how the rich people with all the money buy up the houses, furniture and possessions of the poor.
I have no doubt this is true, but as I already alluded too, aren't the rich people (the people the government will lend money to) buying up ALL commodities, with the hope to profit?
Too many people who borrow money are spending it on things that they hope to resell, but they CAN'T resell. There's no demand for the things they have too much of (luxury, houses, furniture, jewelry), and there's too much of a demand for the things they have no supply of (agriculture, coal, oil).
I assume the poor are eager to sell their houses and possessions because their employers aren't paying them money due to overestimating what the revenues would be of basic things like farms. Lower/middle class workers, because they are getting fired, can no longer afford to meet monthly costs so they try to transition down into a lower standard of living they can afford to maintain.
However, once they get down there, they notice that what was $10 last month, is now $50.
I assume Zimbabwe must have a dying agriculture, and part of their problem might be that they are importing most of their food, and they are being charged outrageous amount of money by other nations.
I would not be surprised at all if Zimbabwe's hyperinflation is partly caused by other Nations charging ridiculous amount of money for basic things. And the reason other nations are charging so much money, is because Zimbabwian dollars is all Zimbabwe has to give, and who the fuck wants to live in Zimbabwe? They have no commodities, no infrastructure, no quality of life. Nobody wants to visit Zimbabwe. So Nations are charging outrageous amounts of Zimbabwean money, because...........they don't trust it. A-ha...
I hope someone out there enjoyed my rant. To the reader: I'd like to hear your thoughts on this. I do realize what I have written probably has some significant flaws, I'm mainly just letting my intuition guide me in an effort to spark some kind of worthwhile discussion.