Why is basic economics to hard for so many "economists" to understand? Why do so many of them struggle with relatively simple concepts of supply and demand, the true difference between the value of wage earned as opposed to a regulated wage and even how to balance a budget? Why do they run from an idea of not spending more than what is collected?
"How An Economy Grows And Why It Crashes" gives us a terrific message about how great countries are built. The authors showed us how a nation of courageous people with initiative and determination can produce huge manufacturing centers that employ large numbers of people. The Schiff brothers story showed how basic economics works to make things people need.
I've included a review from a high school teacher in this link. He echos the sentiments I wrote at the end of this page and in other pages concerning the value in this new classic.
This enlightening edition shows us how those companies could sell their inventory, pay their employees and make a profit. However, not until they took on the risk and put their own very hard work into growing each new venture. There is no reward without effort and challenges.
But we also saw what happens when greed and elitist power plays enter the picture. The island that started with such high ideals and solid vision was being pulled down by small groups of elected officials and appointees. These small group were intent on manipulating the free market economy for their own academic theories and self preservation.
I'm sure all of you who read this book will notice the similarities of the fable presented by the authors to how events have actually unfolded in America.
There was the decision to form a small central government given the task to defend the island from intruders. This very limited form of island coordination was also set up to handle some projects that benefited the island as a whole. For this purpose, those placed in positions to direct such works were paid from the general funds of the island.
Which worked out alright until those entrusted with operations became more focused on the easy flow of island currency and liked the idea of keeping these island "leadership positions." Basic economics was cast aside. The need to only spend an amount less than or equal to the currency provided was dismissed.
Instead certain academics came upon an idea whereby they could create more currency than was really there by first shrinking the value of that currency. It didn't seem too bad at first. And after all, in their minds they were "improving the lifestyle" of the islanders. These academics who by the way had no experience actually working in the island manufacturing system nor building a business, assumed they knew more than those who had done the work.
And with that small crack, the concept of basic economics went out the window and the flood of artificial currency began. More and more islanders forgot, (or were never taught), the idea of that original work ethic and about saving funds and acquiring assets.
The now very large central government encouraged the general populace to do exactly what this "leadership " council had done. Spend their money. This flawed idea suggested that spending by the entire island would drive the economy just as well as manufacturing things the people needed.
This new concept would suggest that the island could just get someone else to make the stuff. The "leaders" would arrange to have the stuff shipped in, to be sold here at home. Since they now had unlimited piles of this undervalued currency, they could use it to pay for the stuff.
All the island really needed was some residents to work in the service sector. After all, they would need people to hand out the goods bought elsewhere. And someone had to clean up the area.
Of course this concept provided many positions within the central government. As the bureaucracy grew, the layers of government employment grew. Basic economics had given way to welfare economics.
The plan to stay within a budget was abandoned. When they reached their limit, the "leaders" simply changed the limit. And this new found method of printing money made it easy to shower it on those who voted for the "leaders." So the easy money continued to flow.
And the populace was encouraged to spend. In fact, the central government needed their citizens to spend. Saving money would grind this artificial system to a halt. The responsible principle of economics had been cast aside in favor of corruption and deceit.
The authors gave a great accounting of how this situation developed in our own world. They described how John Maynard Keynes devised this idea that very large central governments could just print money and control currency supply to manipulate the markets. The rules of basic economics were swept away.
This book is so very important because it makes basic economics easy to understand. As the term "basic" would imply. Politicians don't understand the principles of economics either. But this book will give you an advantage over those elected officials.
The endless cycle of poverty and income disparity is due in large part to a lack of understanding of basic economics. I believe this is by design. In every event there are winners and losers. Follow the money and you'll find the winners.
Who receives the bailouts? Who pays for them? Who receives the easy money from government-backed student loans? Don't confuse the students with the college administration. The money flows through the student's hands, directly into university coffers. Who gets to cover any student loan defaults?
Who gets the easy government-backed mortgage money? Who gets to cover the losses?
Basic economics. Understand this concept and you'll be able to prepare for deflation or inflation. Recognize the principles of economics and you'll understand the history of money. Embrace the opportunity of free market capitalism and you'll be able to help dissolve the entitlement mentality that has a grip on our nation.
Use your new found understanding of basic economics in future elections to send a message to elected officials who have poured gas on this unsustainable debt inferno. Free the next generation from paying the bill for mistakes of those who proceeded them.
At the end of each chapter that told a new part of the fable used to illustrate the message, you'll find a section that helps to relate the story to real life. This book should be required reading for every high school student. And a must read for every adult hoping to gain greater financial literacy.
I would also suggest that you watch the six videos near the end of the resource library. Mike Maloney has provided a free visual series that will also help to clear away any confusion about the worldwide system that controls currency.