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Don’t know how the economy works? Don’t worry!
This thread covers what they didn’t teach you in school.
Read on to learn about when the economy works and when it doesn’t.
This thread covers what they didn’t teach you in school.
Read on to learn about when the economy works and when it doesn’t.
The economy is made up of goods and services, and the money that is exchanged for them.
We transact money for goods and services and vice versa which creates a market.
Markets can range from the Stock market to Pokemon cards.
The sum of the markets creates the economy.
We transact money for goods and services and vice versa which creates a market.
Markets can range from the Stock market to Pokemon cards.
The sum of the markets creates the economy.
This is where it gets crazy.
There are TWO types of money.
Credit and Cash.
Both are created and controlled by the Central Bank.
The Central Bank controls how much money exists by,
1. Printing it. (Yes… out of thin air)
2. Controlling interest rates.
There are TWO types of money.
Credit and Cash.
Both are created and controlled by the Central Bank.
The Central Bank controls how much money exists by,
1. Printing it. (Yes… out of thin air)
2. Controlling interest rates.
Central banks create credit to increase spending.
Spending in the economy is considered good as it passes through more hands.
With more money between people this causes a boom in the economy.
HOWEVER, it also causes a BUST because...
Spending in the economy is considered good as it passes through more hands.
With more money between people this causes a boom in the economy.
HOWEVER, it also causes a BUST because...
Credit is just another word for DEBT.
While debt temporarily stimulates an economy, people, businesses and government debt becomes so big that it’s impossible to pay back.
This is also known as a debt burden.
While debt temporarily stimulates an economy, people, businesses and government debt becomes so big that it’s impossible to pay back.
This is also known as a debt burden.
Now remember the 2nd way banks control money?
The Central Bank tries to balance between printing money for people to use and lowering interest rates so that more people borrow to increase market activity and kick start a sluggish economy.
It should work right? Not quite.
The Central Bank tries to balance between printing money for people to use and lowering interest rates so that more people borrow to increase market activity and kick start a sluggish economy.
It should work right? Not quite.
Overtime, DEBT ALWAYS GROWS LARGER THAN INCOMES CAN PAY.
Spending, incomes and credit then reduces.
Panic arises and a cash run is created making banks default.
Without more money to print or lowering interest rates, the economy CRASHES as it can no longer support itself.
Spending, incomes and credit then reduces.
Panic arises and a cash run is created making banks default.
Without more money to print or lowering interest rates, the economy CRASHES as it can no longer support itself.
The economy is unsustainable. And crashes are becoming harder to recover from.
This leaves people exposed to factors which are unfair.
If you save cash and the government prints money you can buy less.
If you invest and the markets crash, asset (investments) prices drops.
This leaves people exposed to factors which are unfair.
If you save cash and the government prints money you can buy less.
If you invest and the markets crash, asset (investments) prices drops.
It's a broken system, but you can weather the storm by:
1. Increasing your emergency fund of cash.
2. Hold investments (crashes do recover)
3. Invest in safe haven assets like #Bitcoin
and #Gold.
4. Invest in cheap assets for the recovery.
Let me know if you agree!
1. Increasing your emergency fund of cash.
2. Hold investments (crashes do recover)
3. Invest in safe haven assets like #Bitcoin
and #Gold.4. Invest in cheap assets for the recovery.
Let me know if you agree!
