An introduction into the sexy world of economics. You'll be collateralizing debt and outlining the Solow Growth Model in no time!
OK, SO YOU ARE quite an interesting fellow. You want to know more about economics so you can impress your friends and random strangers with big vocabulary and indecipherable jargon at the next Mars Volta concert.
Your exoskeletal junction at the railroad was delayed? Well, I'll be...
Fuck that noise. I just want to be able to sleep at night knowing the truth behind what these puppet politicians and dumb-as-shit newsmen are saying.
Excellent. You're skeptical about what you're being told, and seek out a truth greater than the one presented to you. One that "makes sense," kind of like the sequels to The Matrix.
"I choose to...try and outdo Michael Bay."
But I hope that having the clear and present knowledge that you are constantly being lied to and manipulated to put you in debt sends you to the dream world with ease. Let the class begin.
THE WORLD is a cruel place. We've evolved from beings that slaughter and butcher one another for supremacy to beings that pay others to slaughter and butcher one another for supremacy.
"This paper arbitrarily derives its value from our mutual belief that it will retain said arbitrary value for the use of future transactions. Now take it and go kill that man so I can eat his food and more easily stick my penis in his woman."
Above we have a scientifically accurate depiction of the first economic transaction. The job of an economist is to explain how and why these transactions take place.
Seems simple, right?
Well, not really.
While this may appear easy on the surface, it can get a little complicated when you have 6 billion people on the planet who speak hundreds of different languages and trade in hundreds of different currencies, and all want something different from each other, or at least from the Chinese.
Now with more lead!
Economics is the study of how a society deals with its transactions in the market for goods and services. In other words, how companies produce shit and how and why you buy it, and at what price.
So how do we get these things we want from each other?
Well, before money was developed as a medium of exchange, people had to barter with one another for the things they wanted with the goods they already had in hand. For example, if I have two loaves of bread, but I would like some fish from the man next door, I will have to give up some of my bread to get the fish. What I give up to acquire what I need is known as the opportunity cost. So, if the man with the fish wants 2 pieces of bread for one fish, my opportunity cost for acquiring a fish is 2/1.
Jesus didn't really have an opportunity cost for fish and bread.
There are many problems with such an economic system, the principal one being what is known as the double coincidence of wants. This means that if you want something, lets say soup, you must also have something to exchange for the soup that the other person wants. If you don't have something they want, or are not willing to give up what they want, then you go without your soup. Economists generally agree that at this point sexual services were then offered in lieu of what the other person wanted, leading many men to embrace the barter system and its inefficiencies wholeheartedly. Ok, not really, but I wouldn't bet against it ever having happened.
"No soup for yo--err, Really? Well, in that case, here's a creamy Mexican sausage soup."
So, in order to do away with this inefficient system, the society eventually realized that they could create a medium of exchange to acquire the goods they desired. Basically, money. But it doesn't have to be fiat (paper) money, and historically has not always been that way. Some societies in history have used gold, silver, seashells, pearls, or daughters.
"These daughters will bring me much gold for which I will use to buy more fiddles."
One island society even used stone wheels. The larger they were, the more they were worth. Once during a large transaction, a rich man tried to ship a wheel so massive across a body of water that it sunk his ship. But he was a trustworthy man, and the people whom he planned on giving it to for goods believed him that it was there. It thus circulated throughout their economy without ever having been seen or touched again.
The above story is a parable for both the illusion of the innate value of money as well as for credit and your credit score. Money, whether a piece of paper with a picture of Benajmin Franklin on it or a ten ounce nugget of gold, holds absolutely no innate value. We place value on money because we believe in it. We believe that by giving someone a snickers bar today for a dollar bill, that piece of paper will be accepted by someone else tomorrow so I can buy some skittles. The fact that one dollar is worth a single snickers bar is called its unit of account. The fact that it will be worth the same today as tomorrow is called its store of value.
Angelina has an excellent store of value.
So, now we understand what money is, where it came from, and how it can be used. But what about prices? Who's to stop your local grocer from raising prices on milk to $100 per gallon?
What resolves this dilemma is a seemingly simple concept: supply and demand.
Suppliers of a product want high prices. Consumers want low prices. Where does the equilibrium of these two desires come from? Gun-kata?
Nope. It comes from many identities within the data observed by economists for many years.
The more of a good you have (represented on the X-axis by Q for Quantity), the lower the price will be (represented by the P on the Y-axis). The opposite holds that the less of a product you have, the more expensive it will be. But these identities are only true with all else equal. If no one wants your 11-foot-statue of Bill Clinton, it doesn't matter that you have only two of them. You can't charge high prices because no one wants them, at least for that high price. You'd have to lower the price incrementally until someone (i.e. Kosovo) buys it, at which point you have reached equilibrium, where suppliers and demanders are happy with the price of P* and the set quantity of Q*. Those above equilibrium on the blue demand line D would have bought it even at a higher price, and those below it cannot afford it.
It gets more interesting when this chart is inflated and distorted and people start to lose their homes.
So, depending on the demand (the blue downward-sloping line D) of a good, and/or the supply (the red upward-sloping line S), prices can change. Price and quantity may also vary according to the elasticity of demand, which is represented by the slope of the line. The more vertical the demand curve, the more drastic the changes in consumption will be, given a change in supply or price. Applying the same logic to supply, if the supply curve for, say, marijuana, is elastic, the curve is more horizontal and changes in the quantity of the product affect the price less than other products that are inelastic, such as yachts.
Despite efforts by the assholes at the DEA, marijuana largely has an elastic supply curve.
Still with me? Good, because we're done with the terms and explanations. Time to get down to critical business: critiques.
Where did it all go wrong?
THERE IS NO SPECIFIC POINT for things "going wrong" regarding the economy. Human nature has never been the most benevolent and caring. Look in the history books at any society at any point in time, and you will almost always see a strongMAN dictatorship. Masculinity, militarism, and progress towards bigger and better things to prove such notions have never faltered since God scooped up some radioactive dirt and threw it at his brother, turning him into the mortal man who has had to replicate himself in children ever since in a futile attempt to become immortal. Thomas Hobbes, an English philosopher of the Renaissance, described human life as "nasty, brutish, and short" when in the state of nature, which is basically the state of humanity without an economy to hold society together. It seems that, as humans, we are starkly opposed to getting along.
So, it turns out that the economy artificially inflates our monkeysphere and prevents us from killing each other. It gives us the opportunity to use our freewill and innate intellectual curiosity we are born with to invent, invest, and even ingest. Oreos don't come from the ground.
Such inventiveness eventually led to massive discoveries in technology and science that birthed the Industrial Revolution. The key points of this revolution are that each human being became more productive via the mechanization of labor, the restructuring of society from rural to urban areas into a mass society, and the division of labor to specialize each worker into their own repetitive tasks that make up the production line. This system was glued together by the separation of classes: the capitalist, manager and worker classes (See Marxism). Thus is born the Machine the Wachowski brothers try to warn you about and Zach de la Rocha rages against.
This industrialization brought America to the forefront of the world. People made shit in factories and sold it to other people who made other shit in other factories.
Then, in Post-WWI America, a young man named Edward Bernays, nephew of the famed psychiatrist Sigmund Freud, founded the public relations industry and helped corporations hone their marketing and advertising skills. He taught them to do away with the advertising methods they were using that were based around rationality and practicality, and rather appeal to their innate and irrational desires for sex, power, acceptance and individuality. In his book Propaganda, Bernays lays out basically how to control this new mass society and have them do whatever you want them to do. Soon a rising politician got his hands on a copy of this book. His name was Adolf Hitler.
Other influential people of the time, such as Ayn Rand, who most top CEOs point to as a foundational figure in their life, argued that one should completely ignore what those pesky masses think. She argued that the "free market," left on its own, would take care of them. Maximize your profit, and not only will they turn out just fine, but you will also be phenomenally rich. This philosophy was epitomized by the character "Gordon Gekko" in the 80's flick Wall Street, who famously decreed, "Greed is good."
"STOP CALLING ME! It's Gekko, not Geico."
Thus we entered a downward spiral to hell. The economy no longer complemented our lives and made consumption easier, it became our lives. Your job was not a profession to enjoy, it was a means of scraping by until you kicked the bucket. Money was no longer a medium of exchange, but an end to itself. Rich was defined as successful. Throw in the shift from manufacturing to service jobs, and in particular finance, which happened in the 1970s, and the economy was turned into a monster with an insatiable hunger for human bodies, which is pretty much the argument being made by the movie Soylent Green.
"It's the economy! IT'S THE ECONOMY!!"
SO WE NOW UNDERSTAND the basics of how people produce, price, and consume goods, and how it is all kind of fucked up by human nature.
But these products are not limited to things you can see or eat. There are plenty of other ways the savvy assholes of today's economy use information against you to make money off of every breath you take.
Take student loans for example. Let's say that you're a smart young kid who decides to invest in your future by going to college. You take out loans to help pay for it. The seller of this loan then puts your loan and hundreds or even thousands of others they lent out into big boxes called collateralized debt obligations, and sells them to the highest bidder.
Why would someone want to buy debt? Because when you graduate and enter the workforce, you will make monthly payments with interest to the person who claims ownership over your debt. And the really fucked up thing about student loans is that you can never default on them, even if you file for bankruptcy. Why is this? Because too many people are making money from it, like vampire squids sucking the life-blood out of every corner of the economy.
The debt incurred while in college makes sorority girls the most expensive hookers ever.
But hey, at least now that you've graduated and are in the workforce, you can get out of debt by taking money from other suckers that have yet to figure out how fucked up the world (economy) is. This change of role is known as the circular flow of income.
How slavery works.
So, because you were unwittingly raped as a young, impressionable and ambitious fellow, you can try to get your virginity back by raping many others by dosing them with loads of persuasive roofie-like informational jargon.
"Now hold still, this will only put you in debt for the rest of your life."
There are many ways to do this. You can become a marketing agent and make kids and adults alike believe that the shit you're selling will take away the pain they feel from the chaotic and finite nature of their tortured existence.
...brought to you by Betsy Mclaughlin. CEO of Hot Topic.
Or you could actually make the products that the marketers, lawyers, financiers, managers, salesmen, politicians, and basically every other profession in the world are related to and dependent upon in some way shape or form. Yes, the world revolves around consumption. And we all know that what you consume ends up as shit.
"My fellow Americans, we were just hit by the worst terrorist attack in our nation's history. Go Shopping."
WELL, NOT REALLY. Economics is known as the dismal science because no one who has studied the discipline has fully resolved the trenchant dilemmas rampant within the ever-changing and evolving entity known as the economy.
One of these problems is the debate between how much control government should have over the economy.
This argument rages between free-market thinkers (i.e. Ludvig von Mises, Friedrich Hayek) and interventionists (i.e. John Maynard Keynes, Ben Bernanke). In another dimension altogether are the Marxists, who believe that you don't need government nor an economy, because people are nice enough to each other and share everything because no one owns anything (which, coincidentally, is also espoused by the Qur'an). But this system requires workers of the world to unite against the rich capitalists that have enslaved them. Good luck with that, workers!
Karl Marx would recant his philosophy if he met today's AFL-CIO workers.
There are other economists that embrace free-market thinking, but are less retarded, such as Neoclassical economists. No, this is not Neo from The Matrix playing Mozart. These are the predominant economic thinkers of today, represented by popular schools of economic thought such as the Chicago School and the Keynesian School. In a nutshell, as Neoclassicalists they agree that free trade is a good thing and the value of an economy is based upon how useful its goods are to the consumer.
Not sure if this falls under the category of "free trade."
But these two schools can't agree on a lot of things. Chicagoans hate it when central banks and governments intervene in the economy. Keynesians say it is necessary. For a breakdown of their arguments see CRACKED Topics: Federal Reserve and (Anti) Federal Reserve.
So why should I care about any of this?
Because the consequences of a failed economy are disastrous for mostly everyone. But at the same time, the consequences of a successful economy as presently run are disastrous for mostly everyone. This is because only a select few actually understand how the economy works, and they can exploit that privileged information to extract as much money from you as possible. It's a casino, and they're the Hopi Indians handing out free drinks to keep you playing. And you keep on playing...
Well that sucks. So what can I do?
Get involved and understand what is actually going on. This does not come from CNN. Learn how to beat the house. It is difficult, but possible. Once you learn to play the game, you can help to change the game. But you gotta be in a position to make changes, otherwise you'll just be another whiny ignoramus with Ron Paul stickers all over their car.