Hello dear readers.
Today I decided to conduct a small educational program regarding inflation and other things that people usually don’t seriously think about.
In fact, as a person who knows a lot about these issues, it pains me to hear rather stupid and reeking of childish innocence questions from my acquaintances like: why can’t the state print a lot of money so that everyone has enough?
But more striking is the confidence of the people around me in the presence of the US dollar conspiracy, which allegedly fettered the entire planet and does not allow normal countries to develop.
In this article, I will try to dispel some myths related to finance, so that at least you don’t look stupid and remember this educational program before asking questions that you don’t want to answer, but even hear.
A fairly common myth, since for the most part even a person who is not savvy in economics can more or less understand the principle of the gold standard and how money is related to it. Therefore, he considers himself already educated enough to talk on this topic.
In fact, this standard appeared a very long time ago and, as can be seen from the word “standard”, it was used to create universality in the exchange of goods for goods. That is, any money was so attached to it that at any time it could be exchanged for the amount of gold that it costs.
First of all, such a system prevented economic crises at the level of macroeconomics, but as time has shown, the gold standard turned out to be not only a solution to the problem, but also its cause.
The most striking example is the Great Depression in the United States, when a lack of gold supply led to a lack of finance, and thus deflation was caused. This led to an increase in bankruptcies, banking crises, and, eventually, unemployment such as America has never seen before.
Therefore, today not a single country on the planet pegs its currency to gold.
In principle, if you think about it, then from the point of view of logic, everything is correct. For example, I am a university teacher in chemistry, but I love pears, at the same time the farmer grows pears, but he didn’t care about chemistry, but he dreams of a good tractor, and the tractor salesman would be happy to sell it, but he is interested in chemistry lessons.
Thus, in order for everything to go quickly and without a hitch, we need everyone to gather in one place and make an exchange, which, you see, is not very convenient. Then money comes into play, it just serves as that universal thing that can unite us at any time and in different geographical points.
However, everything is not as smooth as it seems. The fact is that each penny for a whole year can participate in several exchanges, so for each transaction it is not necessary to issue a separate coin and therefore it requires less funds.
In addition, no one canceled the demand for money supply. It can be adjusted, which it sometimes does. Central bank through nominal interest rate.
As a result, any economy needs finance, and they, in turn, depend on the volume of production. And although the second statement should be true, it is not, since there are a number of other factors that determine the number money supply. Therefore, it is impossible to print as much money as you need.
In fact, no laws and agreements force the mills to follow this rule. Any state has the right to print as much as it wants, and without providing them with anything other than its own guarantees that these funds can be used as payment for taxes and fees.
In addition, the costs of their production are quite small. For example, it takes less than 5 cents to print a dollar, but 100 dollars will cost the economy 12.3 cents. Not too expensive for such a denomination. Moreover, 90%, and in Russia - 80% are generally in in electronic format for which no cost is required.
And now let's move on to the most important thing. You see, GDP is not a hard indicator. In any country, there are periods of boom when the economy grows and demand exceeds supply and recessions when things are not the case.
So, during the boom, in order to avoid rising inflation caused by a sharp increase in demand for goods of the Central Bank, this demand limits and introduces some tough measures in relation to finance, reducing production.
But when GDP falls, on the contrary, it stimulates this production in order to increase the purchasing power of the population and provide crises and unemployment.
In other words, although GDP is taken into account, they also take into account the level of inflation, unemployment and the value of the currency.
From one point of view it is true, from the other it is not, since these changes do not occur immediately and far from everywhere.
Shops and various businesses change prices slowly and depending on additional costs. For example, a supermarket has to buy price tags of which there can be hundreds or even thousands, various cafes have to buy new menus and booklets.
The same is true for those who need to buy new equipment and more expensive and high-quality components to increase production capacity. What can we say about salaries that are indexed and thus do not change every day.
All this causes prices to remain at a relatively stable level for several months or even years.
This little training can be completed. As a result, we found out why it is impossible just to take and print money for everyone, we understood when it becomes more money than necessary, and when it is less and remember several factors that affect this very amount.
I hope the article turned out to be informative for you, and I can only wish you all the best.
The issue of supplying the population with a large amount of money worries the inhabitants of each country from time immemorial. Indeed, how simple it would be if the state printed money in an endless circulation.
Each person would have an amount sufficient to buy any equipment, car, house. Probably, all people would be happy, satisfied, dressed and shod. However, let's try to imagine a situation of unlimited capital.
A person becomes the owner of a chest of drawers, what will he do next? Will he go to work? Hardly. The point is to earn a measly penny by the sweat of your face if you have a lot of money.
Production will stop, no one will do the necessary, useful things and grow food. The country will gradually return to primitive, hungry times.
A large number of available money does not contribute to the welfare of the population. But apart from this obvious reason, which economists don't even consider as a worthy idea, there are other important points.
Some knowledgeable people tie the inability to print a large amount of money to some kind of gold reserves of the country. The gold standard is a certain amount of gold equal in value to the issued money.
Until recently, this practice existed in many countries of the world. But now the amount of issued money of any country is not tied to gold reserves. The gold standard allowed ordinary money to be exchanged for gold at any time.
Thus, banks were not able to print money in an arbitrary amount, which kept inflation in check. Although individual historical events refute the arguments of adherents of such a practice.
Money in and of itself is of no value. What matters is how much you can get for that cash. Money is the universal unit of exchange.
Accordingly, a person with a large capital can afford a greater number of necessary things. And here the cost of a particular product is connected. If the amount of money were total cost of all manufactured goods, the problem with the release of the required amount of money was solved.
However, the turnover of money includes a large number of pitfalls that make such a simple solution impossible. For example, there are virtual exchanges for which real (paper) money is not needed.
Plus, some people are accumulating, saving their Money. And then there is a demand for affordable (free) cash.
Availability a large number money initially leads to a rapid demand for goods. That's just the volume of goods will not meet the expectations of buyers - the production simply does not have time to create the required quantity.
The only way for manufacturers to somehow regulate demand is to raise prices for products. Prices will skyrocket, and this process is called inflation. As soon as the level of issued money and the volume of goods are equal, the country's economy will return to its previous course.
True, the release of a significant money supply does not always lead to an increase in inflation. If the country's economy is in crisis, the demand for products will allow enterprises to get out of the debt hole, establish production, and invite new employees. And new jobs reduce the unemployment rate.
The main reason for the impossibility of printing a lot of money by the state lies in the complex mechanism of the relationship between the participants in exchange processes.
If the process of exchanging money for goods was crystal clear and transparent, then the idea of universal wealth and equality would have the right to life.
But the economy of a particular country is a multi-headed monster, and it is not an easy task to control it. The state cannot fulfill the will of citizens without paying attention to certain internal economic processes:
Also, do not forget that each country is in close interaction with other participants in the global economy.
There are certain rules and procedures that a civilized state must comply with. collapse national economy can lead to a chain of unpleasant consequences for other countries .
One of the Internet users asked a question, Why can't you print as much money as you need? The question is very relevant and interesting, so let's try to find the answer. What is money? Why are they needed and who created them? Money at one time was a substitute for goods, as long as there are goods, so much money should be.
If the quantity of goods exceeds, then the price rises, in modern world we call it inflation.
How to keep the balance of this ratio is honestly very difficult. It is not easy to understand the price of a product if you do not tie it to money, as well as to find out what came first and what came second. There is a temptation to print as much money as you need without anyone in the country noticing.
It is known in history that once money was tied to gold, and not to a commodity, since the gold reserve is limited by nature itself. Therefore, in this aspect, you don’t roam too much, which explains why can't a country print a lot of money.
In 1914, the tsarist Central Bank determined that the mass of gold reserves corresponds to the mass of rubles. But in wartime, the authorities could not control the printing of money, so there was practically no gold left in such rubles. Power failed, and the world simply abandoned the "gold standard".
The growth of the economy contributed to the development of new industries, and gold seemed to limit this growth. At that time, this decision was absolutely correct. But on the other hand, inflation has increased several times.
The main producer of money is rightfully the United States, but not alone, China also has a great influence. It manufactures many goods that it supplies to all countries of the world. An interesting fact is that the goods are real, but the money they take in return is not. Why do they do it? To have a balance in the economy of the whole world, no one wants to experience a crisis. Although earlier Japan also participated in this. But China's consent is now in question, as the state is at great risk. But it is clear that if this country refuses to accept the dollar, a crisis will be inevitable. Question: Does Russia print money? The experts did not reach an agreement, because the production of rubles in the country is not absolutely open and transparent. Even so, the scale is not large. Bonuses and supplements to social payments are oil money, they are not printed on a machine tool.
But this does not mean that everything is fine, because the same oil currency is the same dollars that China does not accept. That is why if something suddenly changes in the world, then the Russian people will suffer no less. Experts advise that in order to avoid a crisis, money should not be hidden in a “stocking”, but spent and bought goods. Russia's gold reserves are very limited, and are about 11%. The lion's share of all reserves is the currency, but not the banknotes themselves, but rather bonds that are not made from paper, they are virtual, that is, electronic. If the country urgently needs money, the process goes in reverse, the bonds are sold in the United States, while receiving dollars that go to Russia.
The most main feature money is an exchange, so do not be afraid to spend money, they will not disappear anywhere, the owner will simply change. Of course, if a crisis comes and China refuses to accept dollars further, then not only the economy of states and the economy, as well as other industries, will suffer, but monetary system in general, on which the whole world works and lives. The most important function of money is a medium of exchange.
Greetings, dear readers of the blog.
Alexander Popov is with you, and today I want to talk about money. Yes, yes, about the very pieces of paper that almost all civilized people on the planet are now forced to chase. Regular readers of the blog already know how to handle money and how money affects human psychology. In the same article, I will talk about money rather from a scientific point of view.
Why and why am I doing this? Yes, simply because communicating with some people, I sometimes just wonder at their thinking. And the reason for such thinking is an elementary ignorance of the foundations of such a wonderful discipline as “Money and Credit”. More than half of all people do not know the elementary essence of money, its functions, and why it is impossible to print a lot of them so that everyone feels good.
So here is a list of questions that I will try to answer as clearly and clearly as possible in this article: What is money? How does money function? National and international currency. Well national currency.
Also, at the end of the article, I will leave one very interesting documentary film, which tells about what is happening in the world at the moment. money market what caused it and what the consequences might be.
If you are well versed in money and its functioning and clearly know the answer to each question written above, then you can skip the text part of the article and go straight to watching the documentary. For everyone else, the material of the article is mandatory for study, since these are the basics of financial literacy.
It is important to understand that this product should always be the same quantity. That is, if we take a closed (theoretically) economic system- country, region, city, village, etc. - and calculate the cost of all goods and services available in it, then the value of money in this system should be the same. Thus, no matter how many exchanges, sales, barter (exchange of goods) in this system, the amount of money in it will not change, as well as the amount of goods and services. So, let's get started. What is money? Money is the generally accepted equivalent of goods and services. This is a product that can be easily exchanged for any other in a certain ratio.
If in this system, for some reason, there will be more goods and services than money, then the balance rule will immediately work, and the value of money will again be equal to the already new value goods and services. Thus, a unit of money will receive a greater value, and as a result, the prices of goods and services in the system will become lower.
On the other hand, if an additional amount of money is introduced into the circulation of the system, and the quantity of goods and services remains unchanged, then the balance rule will again work, and since there is more money, the cost of a unit of money will fall, respectively, prices will increase.
The first case is an elementary example of deflation, the second is inflation. Now you understand why you can’t just take and print money? You will not become richer, but many people who have cash reserves will become poorer without losing money physically.
The functioning of money described above is elementary, but it is sufficient to understand the essence and functioning of money. Now let's turn to history and talk about the forms of money.
At different times in different countries, different values \u200b\u200bare accepted for money: food, animal skins, and so on. Later, more difficult things appeared: iron, copper, precious stones, silver, gold. The last 2 have long been accepted as a legal form of money.
Later, people noticed that gold and silver were subject to wear and tear from frequent circulation, which reduced their value, and therefore negatively affected their role as a stable equivalent.
The solution to this problem was as follows: all the gold and silver available in the system (as a rule, the state) should be collected in separate custodians - treasuries, banks, etc., and put into circulation banknotes – paper bills and banknotes, each of which indicates exactly how much gold (in value terms) this banknote replaces in circulation and the property of which state this replaced gold is.
This is how the national currency appeared. As already mentioned, each nat. the currency had its own strict ratio to the amount of gold in the treasury. For example, if there were 100 kilograms of gold in the whole country, and 1 million rubles were put into circulation, then 1 gram of gold cost 10 rubles.
This was the exchange rate of the national currency (real). As already mentioned, each state had its own currency with its own exchange rate against gold. And in relation to one gram of gold, the exchange rate of national currencies was determined among themselves.
This was the case before the introduction of the Bretton Woods system, during which it was decided, along with gold, to establish the US dollar as a common equivalent, and the currencies of 44 countries of the world were untied from gold and tied specifically to the dollar.
About this, and about the consequences of this historical fact, the documentary that I promised at the beginning of the article and which I leave here will tell better than me. I advise everyone to watch this movie, as it is really very interesting.
Looked? How do you like the movie? Did you learn something new for yourself? When I watched it for the first time - about 3 years ago - I learned quite a lot for myself useful information. Discuss the film in the comments, with pleasure I will analyze it with you.
So what do we have in our time? The dollar is an international currency, it performs the function of gold, and in addition, it is a means of payment for the international market transactions of each country. The real exchange rate of the national currency against the dollar is determined by the ratio of the amount of national currency to the number of dollars in the state treasury.
Of course, we rarely come across the real exchange rate, and if in some countries such a rate is adopted as official, then the economies of these countries will rapidly know the collapse. Therefore apply different methods containment of the exchange rate, loans and credits are taken from the IMF and other states, and more.
However, it is important to understand only one thing: in order for the exchange rate of the national currency to be stable and acceptable for the country, it is necessary that this country should produce high-quality, demanded and competitive products. Then its gold reserves (those same dollars in the treasury) will grow, and the ratio of the national currency to dollars will decrease.
So, friends, I hope the material of this article was interesting and informative for you. Learn the basics of economics, friends, this is one of the few scientific disciplines, the knowledge of which is real and useful to you in life.
See you soon, dear readers.
Sincerely, .
“The whole advantage of having money lies in the ability to use it”
Benjamin Franklin
