Prices of goods on a market are set by Supply:Demand Equilibrium
If a business knows they can charge more for a good or service and still sell enough to get more profit than selling them all quickly and cheaply, then they have to calculate what to sell at to optimize profits.
You can chart out the supply and the demand as a function of price with inverse correlation at varying strengths, *implying that supply will change to meet market demand so long as enough capable workforce exists to accomplish it.
Now apply this concept to Money.
If Money is plentiful and people are more willing to spend money on goods and services, then the providers of those goods and services will raise the prices to maximize the gains. In this example the regulatory bodies might use Bonds to reclaim and retire money and/or use a variety of techniques targeting loan interest rates in various ways to limit the *creation of money.
If Money is Scarce, then the prices will lower until they reach a threshold at which A) it cannot be produced for cheaper or B) somebody somewhere needs it and therefor will pay the price no matter how comparatively steep. Since these two scenarios are generally quite bad in the context of unnecessary human suffering, unprofitable goods and service industries generally receive subsidies so that regulatory bodies can keep a steady calculated amount of necessary supplies available to citizens far into the future, examples give: food, medicine, hygiene, or housing.
This also has an effect on exchange rates for trade partners. You can set a price on money. If your money is more valuable than another country’s money as a result of their willingness to purchase that money as an investment, then it makes sense to trade and buy up their cheap goods. The USA’s financial system is built around this concept of lending to struggling economies and providing data-heavy telecommunications services, built on the back of their decades of leading the pack for telecommunications technology and their leadership roles in many trade organizations including World Bank headquartered in Washington DC. Basically, the value of USD is dependent on investors in the EU and China owning US Treasury Bonds.
So it becomes obvious to most of us that creation of money can oftentimes be beneficial, but it also devalues savings and bonds, so it’s often thought a delicate balance is needed to maintain value.
*implying - it’s not always true that supply reflects demand in the same way that demand relies on supply, many modern economic theories revolve around the idea that Supply has much more power and therefor regulatory actions which focus on supply are more effective fiscal policies.
*creation of money - Loans create money. If you lend 100 dollars at 5% interest then you get back 105 dollars. While the debt is yet to be repaid, that 5 dollars exists. Debts can be traded as well. At first it doesn’t seem like it would add up to much, but in fact Bonds act as Debts and also large Loans are very very very common for the USA, and this all sort of stacks year after year until it’s reached the current point where the majority of USD is non-M1 M2 which is to say money that doesn’t physically exist: digital money and promissory notes.
Theres a lot more but I can’t be asked to teach economics.
Might be easier to just show the really slow ones a clip of the black and white footage of Germans setting wheelbarrows of their own worthless money on fire after the war.
So here is how it works (in the USA):
Prices of goods on a market are set by Supply:Demand Equilibrium
If a business knows they can charge more for a good or service and still sell enough to get more profit than selling them all quickly and cheaply, then they have to calculate what to sell at to optimize profits.
You can chart out the supply and the demand as a function of price with inverse correlation at varying strengths, *implying that supply will change to meet market demand so long as enough capable workforce exists to accomplish it.
Now apply this concept to Money.
If Money is plentiful and people are more willing to spend money on goods and services, then the providers of those goods and services will raise the prices to maximize the gains. In this example the regulatory bodies might use Bonds to reclaim and retire money and/or use a variety of techniques targeting loan interest rates in various ways to limit the *creation of money.
If Money is Scarce, then the prices will lower until they reach a threshold at which A) it cannot be produced for cheaper or B) somebody somewhere needs it and therefor will pay the price no matter how comparatively steep. Since these two scenarios are generally quite bad in the context of unnecessary human suffering, unprofitable goods and service industries generally receive subsidies so that regulatory bodies can keep a steady calculated amount of necessary supplies available to citizens far into the future, examples give: food, medicine, hygiene, or housing.
This also has an effect on exchange rates for trade partners. You can set a price on money. If your money is more valuable than another country’s money as a result of their willingness to purchase that money as an investment, then it makes sense to trade and buy up their cheap goods. The USA’s financial system is built around this concept of lending to struggling economies and providing data-heavy telecommunications services, built on the back of their decades of leading the pack for telecommunications technology and their leadership roles in many trade organizations including World Bank headquartered in Washington DC. Basically, the value of USD is dependent on investors in the EU and China owning US Treasury Bonds.
So it becomes obvious to most of us that creation of money can oftentimes be beneficial, but it also devalues savings and bonds, so it’s often thought a delicate balance is needed to maintain value.
*implying - it’s not always true that supply reflects demand in the same way that demand relies on supply, many modern economic theories revolve around the idea that Supply has much more power and therefor regulatory actions which focus on supply are more effective fiscal policies.
*creation of money - Loans create money. If you lend 100 dollars at 5% interest then you get back 105 dollars. While the debt is yet to be repaid, that 5 dollars exists. Debts can be traded as well. At first it doesn’t seem like it would add up to much, but in fact Bonds act as Debts and also large Loans are very very very common for the USA, and this all sort of stacks year after year until it’s reached the current point where the majority of USD is non-M1 M2 which is to say money that doesn’t physically exist: digital money and promissory notes.
Theres a lot more but I can’t be asked to teach economics.
You think this girl would understand anything longer than 2 sentences?
I think I lose most people around the graph.
Might be easier to just show the really slow ones a clip of the black and white footage of Germans setting wheelbarrows of their own worthless money on fire after the war.
Is this why Trump wants to annex Canada? He wants their freely made money?