Financial Crisis and Common Misunderstandings

| February 16, 2013 | 0 Comments

We are getting more and more tired of being told that the end of crisis is coming. Among the wide public discussions on the topic stands out the great economic ignorance of many people, who, despite being deeply affected by the crisis, hardly understand economic terms that are applied in everyday life.

Money and value

Sad but true – talking about wealth, it is clearly visible that many think that it is something like Uncle Scrooge swimming in his money in the treasury. Actually money is a derivative of value and value is a characteristic of goods – no matter what the goods are –  gold, petrol, bread, etc. When money was introduced in ancient times, it was meant to replace the simple exchange of one commodity for another and thus make trade easier.

American and European design but made in China

China is the world’s factory, producing goods that are designed in the United States and the European Union. But not long ago US and some countries of the EU used to be the leading producers, too. This means that now the labor of people who used to work in this production, except for the engineers and designers, is no more needed. And the number of engineers and designers is very small compared to the number of workers. So this is the key to understanding where unemployment comes from. Please, do not blame the Chinese because you will sound funny. The EU is trying to cope with the situation by trying to reduce the import of Chinese goods and seems to be doing better than the States.

Unidirectional movement

The stave for greater returns resulted in outsourcing to China and other Asian countries. But greater returns are the main driver of business. But the system will not survive for a long time when one part of the world is producing actual goods, another part is consuming and even not managing to consume everything because it is too profound and versatile. The need to reduce consumption seems to be inevitable, no matter how and when the crisis will end.

Money out of nowhere

The Federal Reserve System is claimed to be able to produce money out of nowhere is becoming widely discussed and analyses show that the amount of money can grow apart from the amount of goods. It will become more and more interesting to hear what facts will be outspoken on the topic.

In conclusion the only thing that can be said is “Still wondering on the situation?”

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