Thursday 13 May 2010

Money Isn't Everything: An Introduction to Economics

We take money for granted today and often if you ask someone what economics is about they will tell its about money. Money is an interesting thing if we analyse it further, in fact from economic point of view money its self possesses no value what so ever! In this article I will try to explain what the principal behind money is and how we have come to use it.
The world we live in is full of useful resources that we can use to better our selves (increase our standard of living) but the problem has always been how to divide these through out the population evenly. You see even in the time of the first humans when resources were in abundant supply we had to get at them. This required time and skill and people had to worry about the daily struggles of life. This meant people failed to advance into great empires. At some point in history the human race made a great jump they decided to barter, to trade, and economics began. People first would trade one resource for another, this was known as barter and it meant people could begin to specialise. Specialisation is when individuals can focus on one thing they are good at so that we can all produce more. In the early societies those that were good at farming could farm enough for many people and then others could work on making other goods like weapons, then these could be swapped with each other. There are how ever a number of huge problems with barter. The first problem with barter is that how can people know what one thing is worth, there is no use a farmer spending all his time raising a cow and then getting just a spear for it. The second problem is related to the first problem, there is no division of units, if a cow is worth four and half a spears what use is half a spear! The final main problem is that resources can perish, if a farmer works hard and farms lots of potato’s then wants to save up so if there is a bad season, he can’t or all his potato’s will rot. The solution if a medium of exchange… money.
The first evidence of money is in Mesopotamia around 3000bc, by making everything worth an amount of money people can save money and freer to specialise. Money was clearly a success and by the time of the Roman Empire the roman currency called denarii was being used through out Europe. Why then did I say that money is useless? Money is just a method of exchanging resources with each other; the value is only in what you can buy with the money. All the money in the world is worth all the resources in the world.
By increasing the amount of money the only thing that happens is you decrease the value of everything. If the only thing you could buy with Pounds was Apples and there were only 40 Apples you could buy, then if the amount of pounds in the world was £1000 then 40 Apples would be worth £1000 (1 Apple = £25). If you mint another £1000 then the total number of pounds becomes £2000 this then means if you have all the money in the world the max you can buy is still 40 apples and each apple is now worth half the amount. This is why government CANT print money to make them richer all it will do is devalue the value of their currency or in other words increase prices. A rise in prices is know as inflation and printing lots of money leads to hyperinflation. This method of gaining wealth has been tried again and again in history, Germany in the 1920s, Greece in 1944 and there are many more examples, it always fails.
Money is only ever worth what you can buy with it. There is no use in being a Zimbabwean billionaire.
Written By Jonathan Martin 24/4/10

Wednesday 12 May 2010

Good Morning Mr Cameron


We now have a new PM David Cameron but also a deputy PM NIck Clegg.. what does this mean? We have a right wing PM and a left wing Deputy PM.. can this work?
Business:
The FTSE 100 Index was previously in free fall seems to be stabilizing but is still on the fall, this could show that the new coalition has yet to gain the support of business.
The pound however has risen from a sump of 1.47 against the dollar to just under 1.5, this shows that the deal has been positive but the pound is still far off 1.54 which it was at the start of the month.
Culturally:
Its difficult to tell what the people think of this deal, many die hard Torys and Lib Dems feel betrayed but it is generally seen as a good decision by most I believe as at least we now have a government... although facebook polls showed most people wanted a lib-lab coalition and if not a re-election with only a small proportion wanting a Lib-servitive coalition but facebook does not represent the whole population. Perhaps this is one of the challenges to David Cameron, trying to persuade the youth that Torys are not evil! He will also face scrutiny Europe for his parties allegiance in the European parliament.
Economically:
We don't know what the result of this deal will be, many labour supports believed Tory cuts would cause a double dip recession... this is unclear at the moment but they have stated they will not increase Nation Insurance or and will seek to alleviate tax on lower earners which though theories of Fiscal policy is good for the economy unless we already have restored Aggregate Demand to is former level in which case it could lead to future inflation. Inflation is something to watch
What ever happens we can expect interesting times ahead, some think this coalition will fall apart and we will soon have a re-election but what is certain these two men have a hard time ahead.

Tuesday 11 May 2010

Goodbye Mr Brown

Today we see the end of new labours grasp on UK politics, amongst the chaos of the hung parliament I for one would like to take a moment to think of Gordon Brown.
Gordon Brown resigned as Prime Minister of the country and of the Labour party at 7:20pm on the 11th of May. As long serving chancellor and PM through a recession Gordon Brown could perhaps be most remembered for reviving Fiscal policy offer people the chance to post bellow the GOOD things about Mr. Brown and his service the country.
Now we must watch look to our new PM David Cameron, will he serve as a good PM? Can he hold together a coalition with the Lib Dems? What of Gorge Osborn I for one will go into this new era open minded, I hope for a brighter future of reform and stable real ecological economic growth.