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> How the Economy Works, In about 30 minutes
AuthorMusician
post Jan 3 2018, 01:10 AM
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I found this explanation of the economy to be enlightening:

https://www.youtube.com/watch?v=PHe0bXAIuk0

However, as the creator of the vid admits, there's more to it than shown. An example I can think of right off is the impact of fraud, having been a victim of it while at MCI/Worldcom. Sure put a crimp on my income growth, productivity contribution and credit. But from a macro econ POV, fraud might not be that much of an economic mover, more like a symptom of general economic movement.

What would you add to the above explanation of economics?

What's wrong about the above explanation?

What conclusions, if any, do you draw from the above explanation?
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Gray Seal
post Jan 19 2018, 12:07 AM
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What would you add to the above explanation of economics?

The interference of government deficit spending upon the market is not mentioned. The interference of Central Banks producing money from nothing and giving it to their friends is not mentioned.

What's wrong about the above explanation?

Spending is simply money. You can not spend credit. Credit is a contract.

What conclusions, if any, do you draw from the above explanation?

The author makes fundamental mistakes. Besides the credit is money confusion he also states money drives an economy when it is goods.

The last 4 minutes are poppycock.

There are good illustrations of various economic ideas. Unfortunately these are mixed with poor one. I conclude this video is more confusing than helpful. The author does not understand basic economics.
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Julian
post Jan 19 2018, 06:36 PM
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QUOTE(Gray Seal @ Jan 19 2018, 12:07 AM) *
What would you add to the above explanation of economics?

The interference of government deficit spending upon the market is not mentioned. The interference of Central Banks producing money from nothing and giving it to their friends is not mentioned.


You do know that banking works in exactly the same way, and that the amount of "money" (real money that gets spent in the real economy) that is magicked into existence by retail and commercial bank lending dwarfs what is "produced from nothing and given to their friends" by central banks, by a factor of 10 or more, don't you? That's what fractional reserve banking is - the money lent out by a bank is way more than the money they have on deposit. It's all still money, though.

QUOTE
What's wrong about the above explanation?

Spending is simply money. You can not spend credit.


Stuff and nonsense, because:

QUOTE
Credit is a contract.


No. Repayment of credit is a contract. The money credited is long spent by the time repayment is due, and if "credit were a contract" any spending created from credit money would disappear the moment anyone defaulted on a loan. That doesn't happen - the debtor and the lender may be worse off, but none of the people who got paid by the debtor with the money they were loaned have to give it back. It is real money.

QUOTE
What conclusions, if any, do you draw from the above explanation?

The author makes fundamental mistakes. Besides the credit is money confusion he also states money drives an economy when it is goods.


Wrong. Goods don't do anything on their own. People have to want to trade them. Trade in goods and services doesn't just drive the economy, it IS the economy. The goods (and services) by themselves are worthless until someone gives something in return for them. What they give can be another good or service that the seller wants, but usually these days it is a mutually-agreed form of exchangeable value, more commonly known as MONEY. You're factually correct in that economies can exist without money, but those economies tend to be quite small and not to grow much, if at all.

QUOTE
There are good illustrations of various economic ideas. Unfortunately these are mixed with poor one. I conclude this video is more confusing than helpful. The author does not understand basic economics.


He's not the only one, by the look of it. Your hostility to the very concept of government blinds you to the fact that money was invented before governments were. Indeed, it could be argued that governments became necessary once money was invented so that the creator of money was a neutral third party to any two people engaged in trade that was more complicated than simple barter, for the enforcement of any trade contract between them. That concept got blown when we left the gold standard, and entered the realms of fiat money, though that is of much smaller importance to the creation of money form nothing than fractional reserve banking.
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Gray Seal
post Jan 20 2018, 08:00 PM
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Julian, good point on the problem of fractional reserve lending not being addressed.

If there is no contract to pay back given money the money is a gift.

A market can exist without money. A market can not exist without goods. Money makes markets more efficient than without money. There is good money and bad money. Knowing the difference is part of basic economics. This important basic economic point is missing from the videl. Bad money in a market interferes with a market's potential for the benefit of some at the expense of others.

Government is neutral? Might as well throw in central banks as neutral. Both ideas are false. Another error in the video to not mention the problem of government and central banks distorting markets for their own ends.

You have a good point about fiat money, though money not subject to fractional reserve spending nor creation on demand would be fine even if the money was paper or digital.

The video incorrect and poor too many times.
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